Question

Nettle Co. uses process costing to account for the production of rubber balls. Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. Equivalent units have been calculated to be 17,400 units for materials and 17,000 units for conversion costs. Beginning inventory consisted of $5,500 in materials and $13,200 in conversion costs. April costs were $32,300 for materials and $62,050 for conversion costs. Ending inventory still in process was 9,350 units (100% complete for materials, 50% for conversion). The cost per unit for conversion costs using the FIFO method would be:

Multiple Choice

• $1.10

• $6.65

• $3.65

• $4.20

Answer 1

FIFO is the first in first out method for determining unit cost under process costing.

Conversion costs in April = $62,050

Equivalent units for conversion costs = 17,000 units

The cost per unit for conversion costs using the FIFO method = $62,050/17,000 = $3.65

Answer is $3.65