Question

Gambino Construction adds materials at the beginning of production and incurs conversion cost uniformly throughout manufacturing. Consider the data that follow.

Units
Beginning work in process 20,000
Started in August 60,000
Production completed 55,000
Ending work in process,40% complete 25,000

Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion cost totaled $270,000. Assuming use of the weighted-average method, which of the following choices correctly depicts the number of equivalent units for conversion cost and the conversion cost per equivalent unit?

Equivalent Units Materials Conversion Cost Per Equivalent Unit
a. 69,800 $4.31
b. 80,560 $4.28
c. 80,560 $5.40
d. 96,700 $4.28
e. 96,700 $5.40

Answer 1

Gambino Construction

1. The number of equivalent units for conversion cost = 65,000 units

2. The conversion cost per equivalent unit = $6.00 per unit.

Step-by-step explanation:

a) Data and Calculations:

Beginning work in process 20,000 units

Started in August 60,000 units

Production completed 55,000 units

Ending work in process,40% complete 25,000 units

Conversion cost:

Beginning work in process = $120,000

August conversion cost = $270,000

Total conversion costs = $390,000

Method = Weighted-average

Equivalent unit of Conversion:

Started and completed = 55,000 units 100% complete = 55,000

Ending inventory = 25,000 units 40% complete = 10,000

Total equivalent units during August = 65,000 units

Cost per equivalent unit = $390,000/65,000 = $6.00

b) Under the weighted-average method, the equivalent units do not include the beginning unit of work-in-process, but the total cost that determines the costs of the units started and completed and the ending work-in-process includes the cost of the beginning work-in-process.