The May Corporation uses a process system. During the current period, 2800 units were started and 1600 units were completed and transferred out. Ending units were 60% complete for materials and 45% complete for conversion costs. Direct materials costs added were $42,405 and conversion costs added were $27,870. There was no beginning WIP Inventory and conversion costs are added evenly throughout the process. At the end of the period, the cost per equivalent unit for conversion costs would be closest to
A)$17.42.
B)$18.28.
C)$13.02.
D)$26.50.

Question

Quizplus · Accepted Answer

To calculate the cost per equivalent unit for conversion costs, first determine the equivalent units for conversion costs. Since 1600 units were completed and transferred out, they are 100% complete for conversion costs. The ending units were 60% complete for materials and 45% complete for conversion costs, so for the 1200 units in ending inventory (2800 started - 1600 completed = 1200), only 45% of the conversion costs apply. Thus, the equivalent units for conversion costs are 1600 (completed units) + (1200 units * 45%) = 1600 + 540 = 2140 equivalent units. The conversion costs added were $27,870. Therefore, the cost per equivalent unit for conversion costs is $27,870 / 2140 = $13.02.

The May Corporation Uses a Process System