Question

Astoria Computer Systems, Inc., manufactures printers. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $100,000 during the month. Work-in-process records revealed that 4,000 cards were started in January, 2,000 cards were complete, and 1,500 units were spoiled as expected. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.What are the respective direct material costs per equivalent unit, assuming spoiled units are recognized or ignored?

a. $20.00; $35.00b. $25.00; $40.00c. $30.00; $45.00d. $35.00; $50.00

Answer 1

b. $25.00; $40.00

Step-by-step explanation:

$100,000

If recognized

All the units will be used to determinate the unit cost.

so the 100,000 cost is distribute over the 4,000 units

100,000 / 4,000 = 25

If ignored

the 1,500 spoiled units are not used to determinate the unit cost.

4,000

-1,500

2,500 units will take the cost

100,000/2,500 = 40