Question

A department uses the FIFO method of process costing. All direct materials are added at the beginning of the process. This department has the following data for this month.

• 223 units in beginning WIP (41% complete with respect to conversion costs).
• 9,791 units started
• 139 units in ending WIP (32% complete with respect to conversion costs).
• $1,140 beginning WIP direct materials costs
• $1,124 beginning WIP conversion costs
• $92,288 current month direct materials costs
• $85,721 current month conversion costs

What is the department's conversion cost per equivalent unit for this month (round final answer to nearest cent if necessary)?

Answer 1

Solution

Conversion cost per equivalent unit for this month= $8.72

Working

STEP 1 (FIFO)
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	223	100%	41%	0%	59%
Units introduced	9,791
Total units to be accounted for	10,014
Completed and Transferred unit	9,875	0%	0%	100%	100%
Ending WIP	139	0%	0%	100%	32%

.

STEP 2 (FIFO)
Equivalent Units
	Total Units	Material		Conversion cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	223	0%	-	59%	132
From units started/Introduced	9,652	100%	9,652	100%	9,652
Total	9,875		9,652		9,784
	Total Units	Material		Conversion cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	139	100%	139	32%	44
Total EUP	10,014		9,791		9,828

.

	Conversion cost
Cost incurred in Current Period	$ 85,721
Total Equivalent Units	9,828
Cost per Equivalent Units	$ 8.72