During March,the production department of a process operations system completed and transferred to finished goods 25,000 units that were in process at the beginning of March and 110,000 units that were started and completed in March.March's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to labor.At the end of March,30,000 additional units were in process in the production department and were 100% complete with respect to materials and 30% complete with respect to labor.The production department incurred direct materials cost of $253,000 and its beginning inventory included materials cost of $93,500.Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

A) $1.53.
B) $2.48.
C) $2.10.
D) $2.57.
E) $2.40.

Question

Sonali Dhingra · Accepted Answer

Final Answer : C, Explanation :  The total cost of materials is the sum of the beginning inventory materials cost and the materials cost incurred during the month: $93,500 + $253,000 = $346,500. The total units to account for materials are the units completed and transferred out (25,000 + 110,000) plus the equivalent units for the ending inventory's materials (30,000, since they are 100% complete with respect to materials). Thus, the total units are 135,000 + 30,000 = 165,000 units. The direct materials cost per equivalent unit is $346,500 / 165,000 = $2.10.

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