Question

A firm called Can't Be Stopped, Won't Be Stopped uses process costing to determine the cost of inventory. All direct materials are added at the beginning of the process.Last month, the firm's second department in the process, Department B, had 1,000 units in BWIP (50% complete with respect to conversion costs), completed 9,000 units, and had 500 units in ending inventory (25% complete with respect to conversion costs). The firm has the following costs in the WIP-Department B's T-account.Direct Materials Conversion Costs Transferred-in CostsBWIP cost $25,000 $75,000 $150,000Current period cost $275,000 $1,000,000 $1,250,000Which of the following shows the conversion cost per equivalent unit rates using the FIFO and weighted average methods (round rates to nearest cent if necessary)?a. Weighted average: $113.16 conversion costs per equivalent unitFIFO: $117.65 conversion costs per equivalent unitb .Weighted average: $117.65 conversion costs per equivalent unitFIFO: $113.16 conversion costs per equivalent unitc. Weighted average: $117.81 conversion costs per equivalent unitFIFO: $115.94 conversion costs per equivalent unitd. Weighted average: $115.94 conversion costs per equivalent unitFIFO: $117.81 conversion costs per equivalent unit

Answer 1

Answer:

c.

Weighted average: $117.81 conversion costs per equivalent unit

FIFO: $115.94 conversion costs per equivalent unit

Explanation:

completed       9,000

ending WIP        500 at 25%

beginning WIP 1,000 at 50%

weighted average:

completed units + percentage of completion ending WIP

9,000 + 500 x 25% = 9,125

cost: 75,000 + 1,000,000 = 1,075,000

conversion cost per unit:

1,075,000 / 9,125 = 117,81

FIFO

completed units + percentage of completion ending WIP - begining WIP

9,000 + 500 x 25% - 1,000 x 50% = 8,625

cost of the equivalent units

1,000,000 / 8,625 = 115.94