Question

Bentley Enterprises uses process costing to control costs in the manufacture of Dust Sensors for the mining industry. The following information pertains to operations for November.

	Units
Work in process, November 1st		17,000
Started in production during November		110,000
Work in process, November 30th		25,000
The beginning inventory was 60% complete as to materials and 20% complete as to conversion costs. The ending inventory was 80% complete as to materials and 40% complete as to conversion costs. Costs pertaining to November are as follows: Beginning inventory: direct materials, $55,560; direct labor, $21,320; manufacturing overhead, $16,240. Costs incurred during the month: direct materials, $478,000; direct labor, $192,880; manufacturing overhead, $401,160. What is the equivalent unit cost for the conversion costs assuming Bentley uses first-in, first-out (FIFO) process costing?

Answer 1

Equivalent units for the conversion cost = 108,600

Calculations

STEP 1
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	17,000	60%	20%	40%	80%
Units introduced	110,000
Total units to be accounted for	127,000
Completed and Transferred unit	102,000	0%	0%	100%	100%
Ending WIP	25,000	0%	0%	80%	40%

STEP 2
Equivalent Units
	Total Units	Materials		Conversion Cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	17,000	40%	6,800	80%	13,600
From units started/Introduced	85,000	100%	85,000	100%	85,000
Total	102,000		91,800		98,600
	Total Units	Materials		Conversion Cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	25,000	80%	20,000	40%	10,000
Total EUP	127,000		111,800		108,600

STEP 3
Cost per Equivalent Units AND Cost to be accounted for
	Materials	Conversion Cost	TOTAL
Cost incurred in Current Period	$    478,000.00	$   594,040.00*	$   1,072,040.00
Total Equivalent Units	111,800.00	108,600.00
Cost per Equivalent Units	$ 4.28	$ 5.47
Cost of Beginning WIP	$ 55,560.00	$ 37,560.00	$         93,120.00
Total cost to be accounted for			$   1,165,160.00

Conversion cost include labor and overhead cost

Cost per Equivalent Units for Conversion cost= $5.47