Carmelita Inc., has the following information available: At the beginning of the period, there were 500 units in process that were 60% complete as to conversion costs and 100% complete as to direct materials costs. During the period, 4,500 units were started and completed. Ending inventory contained 340 units that were 30% complete as to conversion costs and 100% complete as to materials costs. The company uses the FIFO process cost method.
The cost of completing a unit during the current period was:
A) $36.19
B) $34.88
C) $35.95
D) $35.89

Question

Carmelita Inc., has the following information available:  At the beginning of the period, there were 500 units in process that were 60% complete as to conversion costs and 100% complete as to direct materials costs. During the period, 4,500 units were started and completed. Ending inventory contained 340 units that were 30% complete as to conversion costs and 100% complete as to materials costs. The company uses the FIFO process cost method.
The cost of completing a unit during the current period was:
A) $36.19 
B) $34.88 
C) $35.95 
D) $35.89

Quizplus · Accepted Answer

To calculate the cost of completing a unit during the current period, we need to use the FIFO process cost method to calculate the equivalent units of production for both direct materials and conversion costs.

Calculation of equivalent units of production:

Direct materials: 
Beginning inventory: 500 x 100% = 500 
Started and completed: 4,500 x 100% = 4,500 
Ending inventory: 340 x 100% = 340 
Total equivalent units of production for direct materials = 5,340

Conversion costs: 
Beginning inventory: 500 x 60% = 300 
Started and completed: 4,500 x 100% = 4,500 
Ending inventory: 340 x 30% = 102 
Total equivalent units of production for conversion costs = 4,902

Next, we need to calculate the total cost of production, which includes both direct materials and conversion costs.

Calculation of total cost of production:

Beginning inventory cost: 
Direct materials: $20,000 x 100% = $20,000 
Conversion costs: $14,400 x 60% = $8,640 
Total beginning inventory cost = $28,640

Cost added during the period: 
Direct materials: $99,000 
Conversion costs: $53,325 
Total cost added during the period = $152,325

Ending inventory cost: 
Direct materials: $5,200 x 100% = $5,200 
Conversion costs: ($23,211 + $4,504) x 30% = $8,483 
Total ending inventory cost = $13,683

Total cost of production: 
Beginning inventory cost + Cost added during the period - Ending inventory cost = 
$28,640 + $152,325 - $13,683 = $167,282

Finally, we divide the total cost of production by the total equivalent units of production to get the cost per unit:

Cost per unit = Total cost of production / Total equivalent units of production 
Cost per unit = $167,282 / 5,340 = $35.95

Therefore, the cost of completing a unit during the current period was $35.95, which is closest to option C.