Question

Sparky Corporation uses the FIFO method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 38,000 units, 100% complete as to materials and 55% complete as to conversion. Units started and completed: 123,000. Units completed and transferred out: 161,000. Ending Inventory: 36,500 units, 100% complete as to materials and 25% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $56,000. Costs in beginning Work in Process - Conversion: $61,850. Costs incurred in February - Direct Materials: $375,730. Costs incurred in February - Conversion: $612,150. Calculate the cost per equivalent unit of conversion.

Answer 1

Answer:

cost per equivalent unit of conversion = $4.10

Explanation:

beginning WIP = 38,000

100% complete for materials

55% complete for conversion, 45% remaining to be completed

units started and completed = 123,000

units completed and transferred out = 161,000 (including 38,000 of beginning WIP)

ending WIP = 36,500

100% complete for materials

25% complete for conversion

equivalent units processed during this period:

materials = 123,000 + 36,500 = 159,500 EUP

conversion costs = (38,000 x 0.45) + 123,000 + (36,500 x 025%) = 149,225 EUP

cost per equivalent unit of conversion = $612,150 / 149,225 EUP = $4.102194672 ≈ $4.10