Zuniga Ltd uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: Using the weighted average method, the number of equivalent units for conversion costs was
A) 1,070
B) 1,020
C) 1,170
D) 1,380

Question

Quizplus · Accepted Answer

To calculate equivalent units for conversion costs using the weighted average method, we need to combine the equivalent units for the units started and completed in May with the equivalent units for the units in ending inventory.

Equivalent units for units started and completed:
Conversion costs = 1,200 units x 100% = 1,200 units

Equivalent units for units in ending inventory:
To calculate this, we need to determine how far along the conversions were for the 300 units in ending inventory at the end of May. Using the weighted average method, the total cost to account for is $38,040 (cost of units completed in May plus cost of units in ending inventory).

Cost per equivalent unit for conversion costs = $38,040 ÷ 1,200 equivalent units = $31.70

Equivalent units for ending inventory:
Conversion costs = 300 units x 60% = 180 units

Total equivalent units for conversion costs = 1,200 + 180 = 1,380
Therefore, Choice C is the correct answer.

Zuniga Ltd Uses a Process Costing System