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A company uses the weighted average method for inventory costing

Accounting

A company uses the weighted average method for inventory costing. At the start of a period the production department had 22,000 units in beginning Work in Process inventory which were 41% complete; the department completed and transferred 166,000 units. At the end of the period, 23,000 units were in the ending Work in Process inventory and are 76% complete. The production department had conversion costs in the beginning goods is process inventory of $100,000 and total conversion costs added during the period are $726,850. Compute the conversion cost per equivalent unit.

Multiple Choice

  • $4.57.

  • $4.51.

  • $4.15.

  • $4.36.

  • $4.72.

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Option(B). $4.51 is the correct answer.

  Weighted Average Method-Equivalent production    
         
  Unit Reconcilation      
  Beginning Work in Process Inventory, May 1           22,000    
  Started this period         167,000    
  Cost Charged to account for:         189,000    
  Completed and Transferred out         166,000    
  Ending Work in Process Inventory, May 31           23,000    
  Total units accounted for:         189,000    
         
  Equivalent units of production      
a.   Units %Conversion EUP -Conversion
  Completed and Transferred out         166,000 100%                     166,000
  Ending WIP           23,000 76%                       17,480
  Total UNITS         189,000                       183,480
         
  Cost per Equivalent unit of production     EUP -Conversion
b. Beginning WIP           22,000   $                100,000
  Started         167,000   $                726,850
  Total Costs         189,000 Costs $                826,850
  Div, Equivalent units   EUP                     183,480 units
  Cost per Equivalent unit of production     $ 4.51
         
         

*During computation of Equiavlent units:

*Beginning WIP is irrelevant in this case.

*Completed and Transferred = 100%;

*Ending WIP = Given%.

*The conversion cost per equivalent unit = $4.51.