Question

The following information is available for Department Z for the month of July:

	Units	Cost
Work in process, July 1 (70% complete)	2,000
Direct materials		$ 6,000
Direct labor		3,000
Manufacturing overhead		4,000
Total work in process, July 1		$13,000
Started in July	20,000
Costs added:
Direct materials		$18,000
Direct labor		8,000
Manufacturing overhead		10,000
Total costs added during July		$36,000
Work in process, July 31 (7.5% complete)	2,000

Materials are added at the beginning of the process. Using the FIFO method, Department Z's cost per equivalent unit of production with respect to conversion costs would be:

a.$0.96.

b.$1.18.

c.$0.73.

d.$1.02.

Answer 1

Correct answer--------------a.$0.96.

Working

STEP 1 (FIFO)
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	2,000	100%	70%	0%	30%
Units introduced	20,000
Total units to be accounted for	22,000
Completed and Transferred unit	20,000	0%	0%	100%	100%
Ending WIP	2,000	0%	0%	100%	7.5%

.

STEP 2 (FIFO)
Equivalent Units
	Total Units	Material		Conversion cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	2,000	0%	-	30%	600
From units started/Introduced	18,000	100%	18,000	100%	18,000
Total	20,000		18,000		18,600
	Total Units	Material		Conversion cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	2,000	100%	2,000	7.5%	150
Total EUP	22,000		20,000		18,750

.

Cost incurred in Current Period			$ 18,000
Total Equivalent Units			18,750
Cost per Equivalent Units			$ 0.96