Eban Corporation Uses the FIFO Method in Its Process Costing

question 17

Multiple Choice

Eban Corporation uses the FIFO method in its process costing system.The first processing department,the Welding Department,started the month with 18,000 units in its beginning work in process inventory that were 50% complete with respect to conversion costs.The conversion cost in this beginning work in process inventory was $52,200.An additional 55,000 units were started into production during the month.There were 16,000 units in the ending work in process inventory of the Welding Department that were 20% complete with respect to conversion costs.A total of $284,160 in conversion costs were incurred in the department during the month. The cost per equivalent unit for conversion costs is closest to:

• A) $5.550
• B) $4.608
• C) $5.800
• D) $5.167

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Definitions:

Dilution

The reduction in existing shareholders' ownership percentage of a company as a result of the company issuing new shares.

Shareholder Value

The value delivered to shareholders due to management's ability to grow earnings, dividends, and share price.

Market Value

The existing exchange rate for assets or services in the marketplace.

Underpricing

The practice of listing a company's stock at a lower price than its market value during its IPO, typically to ensure the stock is fully subscribed.