Department 2 is the second of three sequential processes.All materials are added at the beginning of processing in Department 2.During October,Department 2 reported the following data:
The company uses the weighted-average method in its process costing system.To the nearest cent,what is the cost per equivalent unit on the production report for conversion costs?
A) $5.51.
B) $6.45.
C) $6.30.
D) $7.38.

Question

Department 2 is the second of three sequential processes.All materials are added at the beginning of processing in Department 2.During October,Department 2 reported the following data: 
The company uses the weighted-average method in its process costing system.To the nearest cent,what is the cost per equivalent unit on the production report for conversion costs?
A) $5.51. 
B) $6.45. 
C) $6.30. 
D) $7.38.

Quizplus · Accepted Answer

To calculate the cost per equivalent unit for conversion costs, we need to use the formula:

Cost per equivalent unit = (Total conversion costs ÷ Total equivalent units)

Total conversion costs = Direct labor + Factory overhead = $225,300
Total equivalent units = Units completed and transferred out + Equivalent units in ending work in progress

Units completed and transferred out = 48,000
Equivalent units in ending work in progress = (40% x 8,000) + (70% x 6,000) = 3,200 + 4,200 = 7,400

Total equivalent units = 48,000 + 7,400 = 55,400

Cost per equivalent unit = (225,300 ÷ 55,400) = $4.07

Therefore, the cost per equivalent unit for conversion costs is $4.07. The only answer choice that is closest to this value is B ($6.45), so it is the correct answer.

Department 2 Is the Second of Three Sequential Processes