Question

During March, the production department of a process operations system completed and transferred to finished goods 20,000 units that were in process at the beginning of March and 100,000 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, 39,000 additional units were in process in the production department and were 100% complete with respect to materials and 60% complete with respect to labor. The production department incurred direct materials cost of $253,500 and its beginning inventory included materials cost of $93,700. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Answer 1

$2.18 per unit

Step-by-step explanation:

The computation of the direct material cost per equivalent units is shown below:

As we know that

Direct Material cost per equivalent unit is

= Direct material cost ÷ equivalent units

where,

Direct material cost is

= $253,500 + $93,700

= $347,200

And, the number of equivalent units is

Equivalent units of production = Units processed + closing work-in-progress

= [(20,000 + 100,000) × 100%] + (39,000 × 100%)

= 120,000 + 39,000

= 159,000

Now the cost per equivalent unitis

= $347,200 ÷ 159,200

= $2.18 per unit