Ismail Corporation uses the FIFO method in its process costing system. The first processing department, the Forming Department, started the month with 21,000 units in its beginning work in process inventory that were 10% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $6,090. An additional 98,000 units were started into production during the month and 95,000 units were completed and transferred to the next processing department. There were 24,000 units in the ending work in process inventory of the Forming Department that were 30% complete with respect to conversion costs. A total of $269,269 in conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A) $2.900
B) $2.748
C) $2.690
D) $2.314

Question

Quizplus · Accepted Answer

Using the FIFO method, we first need to calculate the equivalent units of production for the month:

Units transferred out = 95,000 units
Ending work in process inventory = 24,000 units × 30% = 7,200 equivalent units
Total equivalent units = 95,000 units + 7,200 units = 102,200 equivalent units

Next, we can calculate the total conversion costs for the month:

Total conversion costs = $269,269

Finally, we divide the total conversion costs by the total equivalent units to get the cost per equivalent unit:

Cost per equivalent unit = Total conversion costs ÷ Total equivalent units
Cost per equivalent unit = $269,269 ÷ 102,200 equivalent units
Cost per equivalent unit = $2.690 (rounded off to three decimal places)

Therefore, the best choice is C, which is the cost per equivalent unit for conversion costs for the month.

Ismail Corporation Uses the FIFO Method in Its Process Costing