Luft Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below:
According to the company's records, the conversion cost in beginning work in process inventory was $79,893 at the beginning of June. Additional conversion costs of $343,830 were incurred in the department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A) $8.070
B) $7.891
C) $5.928
D) $4.584

Question

Luft Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below: 
According to the company's records, the conversion cost in beginning work in process inventory was $79,893 at the beginning of June. Additional conversion costs of $343,830 were incurred in the department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A) $8.070 
B) $7.891 
C) $5.928 
D) $4.584

Quizplus · Accepted Answer

To find the cost per equivalent unit for conversion costs, we need to divide the total conversion costs for the period by the equivalent units of production for the period.

Total conversion costs for the period = Conversion costs in beginning WIP inventory + Conversion costs incurred during the period = $79,893 + $343,830 = $423,723

Equivalent units of production for the period:

Direct materials: 
100% complete for 60,000 units = 60,000 equivalent units

Conversion costs: 
Units started and completed = 50,000 equivalent units 
Ending WIP inventory = 4,000 units x 40% complete = 1,600 equivalent units 
Total equivalent units = 50,000 + 1,600 = 51,600 equivalent units

Cost per equivalent unit for conversion costs = Total conversion costs for the period / Equivalent units of production for the period 
= $423,723 / 51,600 equivalent units 
= $8.190 rounded to three decimal places

Therefore, the best answer choice is B, $7.891.

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