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 18,000 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 $52,200. An additional 55,000 units were started into production during the month. There were 16,000 units in the ending work in process inventory of the Welding Department that were 20% complete with respect to conversion costs. A total of $284,160 in conversion costs were incurred in the department during the month.The cost per equivalent unit for conversion costs is closest to:
A) $5.550
B) $4.608
C) $5.800
D) $5.167

Question

Quizplus · Accepted Answer

The cost per equivalent unit for conversion costs is calculated by dividing the total conversion costs incurred in the department during the month by the total equivalent units of production. The total equivalent units of production is calculated by adding the equivalent units of production from the beginning work in process inventory to the equivalent units of production started and completed during the month. The equivalent units of production from the beginning work in process inventory is calculated by multiplying the number of units in the beginning work in process inventory by the percentage of completion with respect to conversion costs. The equivalent units of production started and completed during the month is calculated by multiplying the number of units started into production during the month by 100%. The total equivalent units of production is 55,000 + (18,000 * 50%) + (16,000 * 20%) = 68,000. The cost per equivalent unit for conversion costs is $284,160 / 68,000 = $5.550.

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