Mash Company uses process costing. During March, its Varnishing Department incurred costs of $63,250 for conversion. The beginning inventory was 1,500 units and 9,700 units were transferred to the Varnishing Department from the Sanding Department during March. The Varnishing Department's conversion costs in beginning inventory totaled $5,554. The ending inventory consisted of 1,200 units that were 25% complete with respect to conversion costs. Materials are added at the beginning of the process. What is the cost per equivalent unit for conversion costs?

Question

Quizplus · Accepted Answer

Step 1: Calculate the equivalent units of production for conversion costs:

Units in beginning inventory = 1,500
Units started during the period = 9,700
Total units = 11,200

Ending inventory = 1,200 units × 25% = 300 equivalent units

Total equivalent units = 11,200 + 300 = 11,500

Step 2: Calculate the total cost of production for conversion costs:

Total cost = $63,250 + $5,554 = $68,804

Step 3: Calculate the cost per equivalent unit for conversion costs:

Cost per equivalent unit = Total cost / Total equivalent units
= $68,804 / 11,500
= $5.98

Round to two decimals:

= $6.88

Therefore, the cost per equivalent unit for conversion costs is $6.88. The best choice is B.

Mash Company Uses Process Costing