Sparky Corporation uses the FIFO method of process costing.The following information is available for February in its Molding Department: Units:
Beginning Inventory: 25,000 units,100% complete as to materials and 55% complete as to conversion.
Units started and completed: 110,000.
Units completed and transferred out: 135,000.
Ending Inventory: 30,000 units,100% complete as to materials and 30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $43,000.
Costs in beginning Work in Process - Conversion: $48,850.
Costs incurred in February - Direct Materials: $287,000.
Costs incurred in February - Conversion: $599,150.
-Calculate the cost per equivalent unit of materials.
A)$2.00
B)$2.05
C)$1.74
D)$2.36
E)$2.61

Question

Quizplus · Accepted Answer

To calculate the cost per equivalent unit of materials, we add the costs in beginning WIP - Direct Materials to the costs incurred in February - Direct Materials and divide by the equivalent units of materials.

Costs in beginning WIP - Direct Materials: $43,000
Costs incurred in February - Direct Materials: $287,000
Total costs: $330,000

Equivalent units of materials:
Beginning Inventory: 25,000 units × 100% = 25,000 units
Units started and completed: 110,000 units × 100% = 110,000 units
Ending Inventory: 30,000 units × 100% = 30,000 units
Total equivalent units: 165,000 units

Cost per equivalent unit of materials = Total costs / Total equivalent units
Cost per equivalent unit of materials = $330,000 / 165,000 units
Cost per equivalent unit of materials = $2.00

Therefore, the cost per equivalent unit of materials is $2.00. The correct choice is B.

Sparky Corporation Uses the FIFO Method of Process Costing