PROBLEM
3.Comparison of Process Costing and Backflushing; Unit Cost Calculations. BF Company had 35 units in process, 50% converted, at the beginning of a recent, typical month; the conversion cost component of this beginning inventory was $525. There were 40 units in process, 50% converted, at the end of the month. During the month, 5,000 units were completed and transferred to finished goods, and conversion costs of $250,000 were incurred.
Required:
(1)Carrying calculations to three decimal places, find the conversion cost per unit for the month:
(a)by the average cost method as used in process costing.
(b)by dividing the total conversion cost incurred during the month by the number of units completed during the month (do not calculate equivalent units).
(c)by dividing the total conversion cost incurred during the month by the number of units started during the month.
(2)Using the three unit costs from Requirement (1), calculate three amounts for the total conversion cost of the ending inventory of work in process to the nearest dollar.
(3)In light of the results of Requirement (2), which of the three methods of calculating unit conversion cost would you recommend for the purpose of inventory costing, 1(a), 1(b), or 1(c)? Why?
