Question

Sellers Company produces potato chips in a single processing department and has a process costing system in which it uses the weighted-average method. The company sold 250,000 units in the month of January. Data concerning inventories follow:

Inventory at January 1: Units
Work in process None
Finished goods 75,000
Inventory at January 31:
Work in process (conversion 75% complete) 16,000
Finished goods 60,000
What were the equivalent units for conversion costs for January?
Group of answer choices
a.251,000
b.253,000
c.247,000
d.235,000

Answer 1

To calculate the equivalent units for conversion costs, add units completed and transferred out to the equivalent units for work in process at the percentage completion for conversion, resulting in 247,000 equivalent units for January. Option C is correct answer.

Step-by-step explanation:

The question asks how to calculate the equivalent units for conversion costs for January using the weighted-average method in a process costing system.

Calculation of Equivalent Units for Conversion Costs:

To calculate the equivalent units for conversion costs, one needs to consider both the units completed and transferred out during the month and the work in process at the month's end.

Here is a step-by-step calculation:

1. Units completed and transferred out: This would be the units sold plus ending finished goods inventory minus beginning finished goods inventory (250,000 + 60,000 - 75,000 = 235,000 units).
2. Equivalent units for ending work in process: For the conversion costs, this is the number of units multiplied by the percentage completion for conversion (16,000 units × 75% = 12,000 equivalent units).
3. Add the two values calculated: 235,000 units from completed and transferred out units + 12,000 equivalent units for conversion in WIP = 247,000 total equivalent units for conversion costs.

The correct answer is that the equivalent units for conversion costs for January are 247,000.