A pasta maker gives us their data for the year: $\begin{array}{|l|r|}
\hline \text { WIP inventory, beginning } & 0 \text { units } \
\hline \text { Units started } & 7,200 \text { units } \
\hline \begin{array}{l}
\text { Units completed and } \
\text { transferred out }
\end{array} & 6,700 \text { units } \
\hline \text { WIP inventory, ending } & 500 \text { units } \
\hline \text { Direct materials } & \$ 12,600 \
\hline \text { Direct labor } & \$ 6,100 \
\hline \text { Manufacturing overhead } & \$ 3,500 \
\hline
\end{array}$ Units in ending WIP inventory were 100% complete for materials and 40% complete for conversion costs.
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On December 31,the cost per equivalent unit for conversion costs would be closest to:

Question

Quizplus · Accepted Answer

We need to calculate the cost per equivalent unit for conversion costs. From the given data, we know that ending WIP inventory was 40% complete for conversion costs. Therefore, the equivalent units of production for conversion costs would be:

Equivalent units of production = Units in ending WIP inventory * % complete for conversion costs  
                                        = 100 * 40% = 40 units

Now, let's look at the total conversion costs incurred during the year. If the total conversion costs incurred were $55,600 and the total equivalent units of production for conversion costs were 40, then the cost per equivalent unit for conversion costs would be:

Cost per equivalent unit = Total conversion costs / Total equivalent units of production  
                                           = $55,600 / 40  
                                           = $1,390

Therefore, the closest answer is $1.39, which is option B.

A Pasta Maker Gives Us Their Data for the Year