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 16,000 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 $19,250. An additional 97,000 units were started into production during the month and 100,000 units were completed and transferred to the next processing department. There were 13,000 units in the ending work in process inventory of the Forming Department that were 30% complete with respect to conversion costs. A total of $593,123 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) $6.100
B) $5.890
C) $5.422
D) $6.115

Question

Quizplus · Accepted Answer

Step 1: Calculate the equivalent units of production for conversion costs.
Units completed and transferred out = 100,000
Ending work in process inventory = 13,000 x 30% = 3,900
Total equivalent units = 100,000 + 3,900 = 103,900

Step 2: Calculate the total cost of production for conversion costs.
Beginning work in process inventory cost = $19,250
Cost incurred during the month = $593,123
Total cost of production = $19,250 + $593,123 = $612,373

Step 3: Calculate the cost per equivalent unit for conversion costs.
Cost per equivalent unit = Total cost of production / Total equivalent units
Cost per equivalent unit = $612,373 / 103,900
Cost per equivalent unit = $5.890

Therefore, the cost per equivalent unit for conversion costs for the month is $5.890, and the best choice is B).

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