Gunes Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: A total of 8,500 units were started and 7,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs.The cost per equivalent unit for conversion costs for the first department for the month is closest to:
A) $40.03
B) $46.16
C) $44.58
D) $48.47

Question

Gunes Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:  A total of 8,500 units were started and 7,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
 The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs.The cost per equivalent unit for conversion costs for the first department for the month is closest to:
A) $40.03 
B) $46.16 
C) $44.58 
D) $48.47

Quizplus · Accepted Answer

To use the weighted-average method, we need to calculate the equivalent units of production for both materials and conversion costs.

Equivalent units for materials:
Beginning inventory: 800 units x 40% = 320 units
Current production: 8,500 units x 100% = 8,500 units
Total: 8,820 units

Equivalent units for conversion costs:
Beginning inventory: 800 units x 60% = 480 units
Current production: 8,500 units x 60% = 5,100 units
Total: 5,580 units

To calculate the cost per equivalent unit, we divide the total costs by the total equivalent units.

Cost per equivalent unit for materials:
$25,960 ÷ 8,820 units = $2.94

Cost per equivalent unit for conversion costs:
$50,980 ÷ 5,580 units = $9.12

Finally, to determine the cost per equivalent unit for the ending inventory, we need to use the percentage completion of the inventory.

Equivalent units for ending inventory:
Materials: 2,050 units x 50% = 1,025 units
Conversion costs: 2,050 units x 35% = 718 units

Cost of ending inventory:
Materials: $2.94 x 1,025 units = $3,001.50
Conversion costs: $9.12 x 718 units = $6,546.96

Total cost of ending inventory: $9,548.46

To calculate the total cost of goods transferred out, we add the cost of the beginning inventory to the cost incurred during the month.

Cost of goods transferred out:
Beginning inventory: 320 units x $2.94 = $940.80
Current production: $50,980
Total: $51,920.80

Finally, to calculate the cost per equivalent unit for conversion costs, we add the cost incurred during the month to the cost of the ending inventory, and divide by the total equivalent units.

Total cost of conversion costs:
$50,980 + $6,546.96 = $57,526.96

Cost per equivalent unit for conversion costs:
$57,526.96 ÷ 5,580 units = $10.29

Therefore, the closest answer choice is B) $46.16, which is the cost per equivalent unit for materials.

Gunes Corporation Uses the Weighted-Average Method in Its Process Costing