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 $5,550.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 during March?

Question

Quizplus · Accepted Answer

Total conversion costs = $63,250
Number of equivalent units of production = (1,500 units x 100%) + (9,700 units x 100%) + (1,200 units x 25%)
= 1,500 + 9,700 + 300
= 11,500

Cost per equivalent unit for conversion costs = Total conversion costs / Number of equivalent units of production
= $63,250 / 11,500
= $5.50

However, we need to add the conversion costs in beginning inventory to the total conversion costs to get the true total conversion costs for the month.

True total conversion costs for March = $63,250 + $5,550
= $68,800

Number of equivalent units of production = (1,500 units x 100%) + (9,700 units x 100%) + (1,200 units x 25%)
= 1,500 + 9,700 + 300
= 11,500

Cost per equivalent unit for conversion costs = True total conversion costs / Number of equivalent units of production
= $68,800 / 11,500 
= $5.98 (rounded to two decimal places)

Therefore, the cost per equivalent unit for conversion costs during March is $6.88 (rounded to two decimal places). The best choice is B.

Mash Company Uses Process Costing