Carmelita Inc., has the following information available: At the beginning of the period, there were 500 units in process that were 60 percent complete as to conversion costs and 100 percent complete as to direct materials costs. During the period 4,500 units were started and completed. Ending inventory contained 340 units that were 30 percent complete as to conversion costs and 100 percent complete as to materials costs. (Assume that 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 percent complete as to conversion costs and 100 percent complete as to direct materials costs. During the period 4,500 units were started and completed. Ending inventory contained 340 units that were 30 percent complete as to conversion costs and 100 percent complete as to materials costs. (Assume that 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 compute the cost per unit, we need to determine the total cost of units started and completed during the period, as well as the total cost of ending inventory.

Beginning WIP (500 units x 60% conversion cost) = 300 equivalent units (EU)
Units started and completed during the period = 4,500
Ending WIP (340 units x 30% conversion cost) = 102 EU

Total EU = 300 + 4,500 + 102 = 4,902

Direct materials cost:
Beginning WIP (500 units x 100% DM cost) = $25,000
Units started and completed during the period = $170,100
Ending WIP (340 units x 100% DM cost) = $17,000
Total DM cost = $212,100

Conversion cost:
Beginning WIP (500 units x 60% conversion cost) = $18,000
Units started and completed during the period = $179,955
Ending WIP (340 units x 30% conversion cost) = $3,575.50
Total conversion cost = $201,530.50

Total cost = DM cost + Conversion cost = $212,100 + $201,530.50 = $413,630.50

Therefore, the cost per unit = Total cost / Total EU = $413,630.50 / 4,902 = $35.95.

Hence, the correct answer is C) $35.95.