Ibarra Corporation uses the first-in, first-out method in its process costing system. The first processing department, the Forming Department, started the month with 16,100 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $20,250. An additional 98,000 units were started into production during the month and 101,000 units were completed and transferred to the next processing department. There were 13,100 units in the ending work in process inventory of the Forming Department that were 30% complete with respect to conversion costs. A total of $594,123 in conversion costs were incurred in the department during the month. The cost per equivalent unit for conversion costs for the month is closest to:
A) $6.05
B) $5.84
C) $5.37
D) $6.07

Question

Quizplus · Accepted Answer

Step 1: Calculate the equivalent units for conversion costs:
Units completed and transferred out: 101,000
Ending work in process units: 13,100 × 30% = 3,930
Total equivalent units for conversion costs: 101,000 + 3,930 = 104,930

Step 2: Calculate the cost per equivalent unit for conversion costs:
Costs incurred during the month: $594,123
Divide costs by equivalent units: $594,123 ÷ 104,930 = $5.67 per equivalent unit

Therefore, the closest answer choice to the cost per equivalent unit is B) $5.84.

Ibarra Corporation Uses the First-In, First-Out Method in Its Process