Castle Company uses the FIFO method in its process costing system. In the Cuttin

Question

Castle Company uses the FIFO method in its process costing system. In the Cutting Department in June, units were four-fifths complete with respect to conversion in the beginning work in process inventory and one-third complete with respect to conversion in the ending work in process inventory. Other data for the department for June follow: Units Conversion Cost Beginning work in process inventory 33,000 $ 38,000 Units started into production, and costs incurred during the month 140,000 $172,550 Units completed and transferred out 101,000 The cost per equivalent unit for conversion cost is closest to:

Explanation / Answer

Units in CWIP = 140000 + 33000 - 101000 = 72000 units Conversion cost equivalent units = 33000 x 1/5 + 68000 + 72000 x 1/3 = 98600 EU Cost per EU = (38000+172550)/98600 = $2.13

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