Final answer:
To calculate the cost of direct materials inventory, multiply the unit cost of each item by the quantity on hand and sum up the costs.
Step-by-step explanation:
The cost of direct materials inventory as of December 31st can be calculated by multiplying the unit cost of each direct material item by the quantity on hand for that item. Add up the costs for all the direct materials to get the total cost of direct materials inventory.
For example, if you have 100 units of Product A with a unit cost of $5 and 150 units of Product B with a unit cost of $10, the cost of direct materials inventory would be (100 units * $5 + 150 units * $10) = $1,500 + $1,500 = $3,000.