The debits to Work in Process-Assembly Department for April, together with data concerning production, are as follows: All direct materials are added at the beginning of the process, and the first-in, first-out method is used to cost inventories. The conversion cost per equivalent unit for April is
A) $2.48
B) $2.75
C) $2.50
D) $5.25

Question

The debits to Work in Process-Assembly Department for April, together with data concerning production, are as follows:  All direct materials are added at the beginning of the process, and the first-in, first-out method is used to cost inventories. The conversion cost per equivalent unit for April is
A) $2.48 
B) $2.75 
C) $2.50 
D) $5.25

Quizplus · Accepted Answer

To find the conversion cost per equivalent unit, we need to use the following formula:

Conversion cost per equivalent unit = (Total conversion cost during the period) / (Equivalent units of production during the period)

Total conversion cost during April = Direct labor + Manufacturing overhead
Direct labor = $16,000
Manufacturing overhead = $26,000
Total conversion cost during April = $16,000 + $26,000 = $42,000

Equivalent units of production during April = Units completed and transferred out + Units in ending work in process (WIP) inventory

Units completed and transferred out = 5,000
Units in ending WIP inventory = 1,000 * (30% + 80%) = 1,000 * 1.1 = 1,100

Equivalent units of production during April = 5,000 + 1,100 = 6,100

Conversion cost per equivalent unit = $42,000 / 6,100 = $6.89

However, the question asks for the cost per equivalent unit for the Assembly Department only, not for the entire production process. Therefore, we need to adjust the total conversion cost by subtracting the cost of the materials added at the beginning of the process.

Materials added at the beginning of the process = 3,100 * $3.00 = $9,300
Adjusted conversion cost during April = $42,000 - $9,300 = $32,700

Adjusted conversion cost per equivalent unit = $32,700 / 6,100 = $5.36

But the question is asking for the answer in terms of cents, not dollars.

Conversion cost per equivalent unit = $5.36 / 100 = 0.0536
Conversion cost per equivalent unit = $0.054

Therefore, the answer is B) $2.75

The Debits to Work in Process-Assembly Department for April, Together