Question

ABC Corp. adds the materials at the beginning of its production process, the materials and the conversion costs add them evenly. At the beginning of the period, the inventory in process had 60% completion; At the end of the period it had 50% completion. Other important data are: initial inventory of goods in process, 1,600 units; units started during the period, 2,000 and units completed during the period, 3,200. Initial inventory costs are distributed among: materials, $ 150,000, conversion costs, $ 80,000. The costs incurred during the period are distributed among: materials, $ 200,000, conversion costs, $ 260,000. Based on this information, we can say that the cost per unit equivalent in conversion costs for the period is Response Options Group

2,000

3, 200

3, 440

3, 600

Answer 1

If the company is following Weighted Average Method, Cost per equivalent unit for conversion would be: $ 100

Workings:

Equivalent Units of Production (EUP) - Weighted Average Method
				Units	% Mat.	EUP- Mat.	% Conv.	EUP- Conv.
Units completed and transferred out				3200	100%	3200	100%	3200
Units in ending inventory				400	100%	400	50%	200
Equivalent units of production						3600		3400

Cost per Equivalent Unit of Production
					Materials		Conversion
Beginning costs					$    150,000.00		$   80,000.00
During the month costs					$    200,000.00		$ 260,000.00
Total cost				Costs	$    350,000.00	Costs	$ 340,000.00
÷	Equivalent units of production			EUP	3600	EUP	3400
Cost per equivalent unit of production					$              97.22		$        100.00

If the company is following FIFO Method, Cost per equivalent unit for conversion would be: $ 106.56

Workings:

A)	Statement of equivalent production					Degree of completion
						Direct Material			Conversion
a)	Particulars	Units	Particulars	Units		%	Units		%	Units
	Opening WIP	1600	Transfer to next process:
	Material Introduced	2000	From O/p WIP	1600		-	-		40%	640
			From Current Intro	1600		100%	1600		100%	1600
			Closing WIP	400		100%	400		50%	200
		3600		3600			2000			2440

Statement of cost per equivalent production
Element of costs	Units	Costs	Cost/eq. units
Direct Material	2000	$      200,000.00	$             100.00
Conversion	2440	$      260,000.00	$             106.56

Let me know if you find this incorrect