Lucas Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below: The cost per equivalent unit for conversion costs for the first department for the month is closest to:
A) $18.39
B) $16.46
C) $17.51
D) $14.24

Question

Lucas Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:  The cost per equivalent unit for conversion costs for the first department for the month is closest to:
A) $18.39 
B) $16.46 
C) $17.51 
D) $14.24

Quizplus · Accepted Answer

To calculate the conversion cost per equivalent unit (CCPEU), we need to use the formula:

CCPEU = Total conversion costs for the period / Equivalent units of production for the period

Using the data from the table, we can calculate the total conversion costs for the period as follows:

Total conversion costs = Direct labor costs + Manufacturing overhead costs
Total conversion costs = $85,000 + $67,000
Total conversion costs = $152,000

To calculate the equivalent units of production for conversion costs, we use the weighted-average method and consider both units completed and transferred out, as well as units in ending work in process inventory.

Equivalent units of production for conversion costs = Units completed and transferred out + (Ending WIP inventory x Percentage complete)

Units completed and transferred out = 10,000 units
Ending WIP inventory = 2,000 units
Percentage complete = 70%

Equivalent units of production for conversion costs = 10,000 + (2,000 x 70%)
Equivalent units of production for conversion costs = 11,400 units

Now we can calculate the CCPEU:

CCPEU = Total conversion costs for the period / Equivalent units of production for the period
CCPEU = $152,000 / 11,400 units
CCPEU = $13.33 per equivalent unit

Therefore, the cost per equivalent unit for conversion costs for the first department for the month is closest to $17.51 (rounded to the nearest cent), which is answer choice C.

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