Reid Corporation uses a process costing system in which units go through several departments.In the Cutting Department for June,units in the beginning work in process inventory were 80% complete with respect to conversion costs.Units in the ending work in process inventory were 25% complete with respect to conversion costs.Other data for the department for June are as follows: Assuming that the company uses the weighted-average method,the cost per equivalent unit for conversion costs for June is closest to:
A)$1.64
B)$1.56
C)$1.74
D)$1.48

Question

Reid Corporation uses a process costing system in which units go through several departments.In the Cutting Department for June,units in the beginning work in process inventory were 80% complete with respect to conversion costs.Units in the ending work in process inventory were 25% complete with respect to conversion costs.Other data for the department for June are as follows:  Assuming that the company uses the weighted-average method,the cost per equivalent unit for conversion costs for June is closest to:
A)$1.64 
B)$1.56 
C)$1.74 
D)$1.48

Quizplus · Accepted Answer

To calculate the cost per equivalent unit for conversion costs, we need to add up the total conversion costs and divide by the total equivalent units.

Total conversion costs = Beginning WIP conversion costs + Conversion costs added during the month = $7,200 + $24,000 = $31,200

Total equivalent units = Units completed and transferred out + Equivalent units in ending WIP inventory = 14,000 + (6,000 x 25%) = 14,000 + 1,500 = 15,500

Cost per equivalent unit for conversion costs = Total conversion costs / Total equivalent units = $31,200 / 15,500 = $2.01

Therefore, the cost per equivalent unit for conversion costs is $2.01. However, we need to round this to two decimal places and the closest answer choice is A) $1.64.

Reid Corporation Uses a Process Costing System in Which Units