Question

Ibarra Corporation uses the first-in, first-out method in its process costing system. The first processing department, the Forming Department, started the month with 17,400 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $33,250. An additional 111,000 units were started into production during the month and 114,000 units were completed and transferred to the next processing department. There were 14,400 units in the ending work in process inventory of the Forming Department that were 30% complete with respect to conversion costs. A total of $607,123 in conversion costs were incurred in the department during the month. The cost per equivalent unit for conversion costs for the month is closest to:

Answer 1

$5.29 per unit

Step-by-step explanation:

The computation of the cost per equivalent unit for conversion costs is shown below:

= Total conversion cost ÷ equivalent units

where

Total conversion cost is $607,123

And, the equivalent units is

= 17,400 × (100 - 0.20) + (114,000 units - 17,400 units) × 100% + 14,400 units × 0.30

= 13,920 units + 96,600 units + 4,320 units

= 114,840 units

Now the cost per equivalent unit is

= $607,123 ÷ 114,840 units

= $5.29 per unit