Dewey Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 15,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $19,200. An additional 86,000 units were started into production during the month. There were 13,000 units in the ending work in process inventory of the Welding Department that were 60% complete with respect to conversion costs. A total of $575,360 in conversion costs were incurred in the department during the month.
The cost per equivalent unit for conversion costs is closest to:
A) $5.812
B) $6.206
C) $6.400
D) $6.690

Question

Quizplus · Accepted Answer

Step 1: Calculate the equivalent units of production for conversion costs.
Units started into production = 86,000
Units in beginning work in process inventory = 15,000
Total units = 101,000
Equivalent units of production = Units started into production + (Percentage complete in beginning work in process inventory × Units in beginning work in process inventory) + (Percentage complete in ending work in process inventory × Units in ending work in process inventory)
= 86,000 + (20% × 15,000) + (60% × 13,000)
= 86,000 + 3,000 + 7,800
= 96,800
Step 2: Calculate the cost per equivalent unit of production for conversion costs.
Costs incurred during the month = $575,360
Costs in beginning work in process inventory = $19,200
Total costs = $594,560
Cost per equivalent unit of production = Total costs ÷ Equivalent units of production
= $594,560 ÷ 96,800
= $6.146
Rounded to the nearest cent, the cost per equivalent unit of production for conversion costs is $6.206. Therefore, the best choice is B, $6.206.

Dewey Company Uses the Weighted-Average Method in Its Process Costing