Eban Corporation uses the first-in, first-out method in its process costing system. The first processing department, the Welding Department, started the month with 24,000 units in its beginning work in process inventory that were 50% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $72,200. An additional 75,000 units were started into production during the month. There were 20,000 units in the ending work in process inventory of the Welding Department that were 20% complete with respect to conversion costs. A total of $324,160 in conversion costs were incurred in the department during the month.The cost per equivalent unit for conversion costs is closest to:
A) $4.57
B) $4.41
C) $5.60
D) $4.97

Question

Quizplus · Accepted Answer

The equivalent units for conversion costs are:Beginning work in process inventory: 24,000 units x 50% = 12,000 equivalent unitsUnits started and completed during the month: 75,000 unitsEnding work in process inventory: 20,000 units x 20% = 4,000 equivalent unitsTotal equivalent units: 12,000 + 75,000 + 4,000 = 91,000 equivalent unitsThe cost per equivalent unit for conversion costs is:$324,160 / 91,000 equivalent units = $4.41

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