Annenbaum Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were: A total of 6,500 units were started and 5,900 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) $30.99
B) $35.92
C) $33.12
D) $34.21

Question

Annenbaum Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were:  A total of 6,500 units were started and 5,900 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) $30.99 
B) $35.92 
C) $33.12 
D) $34.21

Quizplus · Accepted Answer

Step 1: Calculate Equivalent Units
Materials:
Beginning WIP = 400 units × 60% completion = 240 equivalent units
Current Production = 6,500 units × 100% completion = 6,500 equivalent units
Total = 6,740 equivalent units
Conversion costs:
Beginning WIP = 400 units × 30% completion = 120 equivalent units
Current Production = 6,500 units × 70% completion = 4,550 equivalent units
Ending WIP = 50% material completion × 6,740 equivalent units = 3,370 equivalent units
Ending WIP = 35% conversion completion × 4,550 equivalent units = 1,592.5 equivalent units
Total = 6,262.5 equivalent units
Step 2: Calculate Cost per Equivalent Unit
Materials:
Costs added in the department = $22,700 + $70,500 = $93,200
Cost per equivalent unit = $93,200 ÷ 6,740 equivalent units = $13.81 per equivalent unit
Conversion costs:
Costs added in the department = $29,200 + $105,900 = $135,100
Cost per equivalent unit = $135,100 ÷ 6,262.5 equivalent units = $21.54 per equivalent unit
Step 3: Calculate Cost of Ending WIP Inventory
Materials:
3,370 equivalent units × $13.81 per equivalent unit = $46,567.70
Conversion costs:
1,592.5 equivalent units × $21.54 per equivalent unit = $34,363.25
Therefore, the cost per equivalent unit for conversion costs for the first department for the month is closest to $34.21 (rounded to the nearest cent), as option D suggests.

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