A company that follows the Weighted-Average method for inventory valuation has determined the Direct Materials (DM) cost per equivalent unit of $5.00 for a particular period. For the same period, the company has reported 15,000 equivalent units of DM. If the DM costs added to Work-in-Progress (WIP) Inventory during the period is twice the DM costs in the beginning WIP Inventory, then find the DM costs added to WIP Inventory during the period.

Question

Quizplus · Accepted Answer

Total Costs to Account for Direct Materials = Direct Materials Costs per Equivalent Unit × Total Equivalent Units of Direct Materials
Therefore, Total Costs to Account For = $5.00 × 15,000 units = $75,000
Also, Total Costs to Account For = Direct Materials Costs in Beginning WIP Inventory + Direct Materials Costs Added to WIP Inventory during the Period
Therefore, $75,000 = X + 2X;
$75,000 = 3X;
X = $25,000
Hence, Direct Material Costs Added to WIP during the Period = 2X = $50,000.

A Company That Follows the Weighted-Average Method for Inventory Valuation