Marten Corporation uses the FIFO method in its process costing system. Operating data for the Casting Department for the month of September appear below: According to the company's records, the conversion cost in beginning work in process inventory was $83,600 at the beginning of September. Additional conversion costs of $427,682 were incurred in the department during the month. The cost per equivalent unit for conversion costs for September is closest to: (Round off to three decimal places.)
A)$5.498
B)$5.779
C)$5.620
D)$5.500

Question

Marten Corporation uses the FIFO method in its process costing system. Operating data for the Casting Department for the month of September appear below:  According to the company's records, the conversion cost in beginning work in process inventory was $83,600 at the beginning of September. Additional conversion costs of $427,682 were incurred in the department during the month. The cost per equivalent unit for conversion costs for September is closest to: (Round off to three decimal places.)
A)$5.498 
B)$5.779 
C)$5.620 
D)$5.500

Quizplus · Accepted Answer

To calculate the conversion cost per equivalent unit, we need to divide the total conversion costs incurred during the period by the total equivalent units produced.

Total equivalent units produced = (Units started and completed × 100%) + (Units in ending WIP inventory × % completion)

Units started and completed = 21,200
Units in ending WIP inventory = 7,600

For equivalent units of production:

Materials = 29,700
Conversion = 19,800 (given)

Total equivalent units of production = 29,700 + 19,800 = 49,500

Conversion cost per equivalent unit for September = ($83,600 + $427,682) ÷ 49,500 = $511,282 ÷ 49,500 ≈ $10.323

Therefore, the cost per equivalent unit for conversion costs for September is closest to $5.620 (C).

Marten Corporation Uses the FIFO Method in Its Process Costing