Ibarra Corporation uses the FIFO method in its process costing system.The first processing department, the Forming Department, started the month with 16,000 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 $19,250.An additional 97,000 units were started into production during the month and 100,000 units were completed and transferred to the next processing department.There were 13,000 units in the ending work in process inventory of the Forming Department that were 30% complete with respect to conversion costs.A total of $593,123 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:

A) $6.100
B) $5.890
C) $5.422
D) $6.115

Question

Mariela Navarro · Accepted Answer

Final Answer : B, Explanation :  Step 1: Calculate the equivalent units of production for conversion costs.Beginning WIP: 16,000 units × 20% complete = 3,200 unitsCurrent production: 97,000 units completed + 13,000 units ending WIP = 110,000 units110,000 units × 100% complete = 110,000 equivalent unitsTotal equivalent units = 110,000 + 3,200 = 113,200 equivalent unitsStep 2: Calculate the total conversion cost per equivalent unit.Total conversion costs = $593,123Total equivalent units = 113,200 equivalent unitsConversion cost per equivalent unit = $593,123 ÷ 113,200 equivalent units = $5.89 (rounded to nearest cent)Therefore, the best answer is B) $5.89. FIFO methodUnits started and completed during the period = Units completed during the period - Units in beginning work in process inventory = 100,000 - 16,000 = 84,000

Definitions

Learning Objectives

Learning Objectives

Related questions