Gambino Construction adds materials at the beginning of production and incurs conversion cost uniformly throughout manufacturing. Consider the data that follow. Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion cost totaled $270,000. Assuming use of the weighted-average method, which of the following choices correctly depicts the number of equivalent units for conversion cost and the conversion cost per equivalent unit?

Question

Gambino Construction adds materials at the beginning of production and incurs conversion cost uniformly throughout manufacturing. Consider the data that follow.  Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion cost totaled $270,000. Assuming use of the weighted-average method, which of the following choices correctly depicts the number of equivalent units for conversion cost and the conversion cost per equivalent unit?

Quizplus · Accepted Answer

To determine the equivalent units of production for conversion costs, we need to calculate the equivalent units of production for the beginning work-in-process (BWIP) inventory and for the current period.

BWIP:
Conversion cost equivalent units = 100% x 10,000 units
Conversion cost equivalent units = 10,000 units

Current period:
Conversion cost equivalent units = 100% x 50,000 units = 50,000 units

Total equivalent units of production for conversion costs = 10,000 + 50,000 = 60,000 units

To determine the cost per equivalent unit, we need to calculate the total conversion cost incurred during August and the conversion cost in the BWIP inventory.

Total conversion cost incurred in August = $270,000
Conversion cost in the BWIP inventory = $120,000

Total conversion cost = $120,000 + $270,000 = $390,000

Cost per equivalent unit of production for conversion costs = Total conversion cost / Total equivalent units of production for conversion costs
Cost per equivalent unit of production for conversion costs = $390,000 / 60,000 units
Cost per equivalent unit of production for conversion costs = $6.50

Therefore, the correct answer is Choice C.

Gambino Construction Adds Materials at the Beginning of Production and Incurs