Question

Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 90,000 units, 70% complete as to materials and 20% complete as to conversion.
Units started and completed: 270,000.
Units completed and transferred out: 360,000.
Ending Inventory: 35,000 units, 40% complete as to materials and 15% complete as to conversion.

Costs:
Costs in beginning Work in Process - Direct Materials: $47,200.
Costs in beginning Work in Process - Conversion: $89,700.
Costs incurred in October - Direct Materials: $759,920.
Costs incurred in October - Conversion: $929,300.

Calculate the cost per equivalent unit of materials.

Multiple Choice

a. $2.80
b. $2.50
c. $2.04
d. $2.36
e. $2.16

Answer 1

The cost per equivalent unit of materials is $2.68.

Step-by-step explanation:

To calculate the cost per equivalent unit of materials, we need to consider the units started and completed, as well as the units in ending inventory. We can calculate the equivalent units of materials for the units started and completed by multiplying the units started and completed by the percentage of completion as to materials. For the ending inventory, we multiply the units in ending inventory by the percentage of completion as to materials. We then divide the total costs incurred in October for direct materials by the total equivalent units of materials. Using the given information:

Equivalent units for units started and completed: 270,000 x 100% = 270,000

Equivalent units for ending inventory: 35,000 x 40% = 14,000

Total equivalent units of materials: 270,000 + 14,000 = 284,000

Cost per equivalent unit of materials = Costs incurred in October - Direct Materials / Total equivalent units of materials = $759,920 / 284,000 = $2.68