Index Company uses the FIFO method in its process costing system.The first processing department,the Forming Department,started the month with 17,000 units in its beginning work-in-process inventory; the units were 10% complete with respect to conversion costs.The conversion cost in this beginning work-in-process inventory was $9,010.An additional 76,000 units were started into production during the month,and 83,000 units were completed and transferred to the next processing department.There were 10,000 units in the ending work-in-process inventory of the Forming Department; 70% of the units were complete with respect to conversion costs.A total of $445,915 in conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month on the Forming Department's production report? (Round off to three decimal places.)
A) $5.050.
B) $5.300.
C) $5.867.
D) $5.150.

Question

Quizplus · Accepted Answer

The equivalent units for conversion costs are calculated as follows:Beginning work-in-process inventory: 17,000 units x 10% complete = 1,700 equivalent unitsUnits started and completed: 76,000 unitsEnding work-in-process inventory: 10,000 units x 70% complete = 7,000 equivalent unitsTotal equivalent units: 1,700 + 76,000 + 7,000 = 84,700 equivalent unitsThe cost per equivalent unit for conversion costs is calculated as follows:Cost per equivalent unit = Total conversion costs / Total equivalent unitsCost per equivalent unit = $445,915 / 84,700 equivalent unitsCost per equivalent unit = $5.250 (rounded to three decimal places)

Index Company Uses the FIFO Method in Its Process Costing