During December, the production department of a process operations system completed and transferred to finished goods a total of 65,000 units of product. At the end of March, 15,000 additional units were in process in the production department and were 80% complete with respect to materials. The beginning inventory included materials cost of $57,500 and the production department incurred direct materials cost of $183,000 during December. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.
A) $2.82.
B) $2.38.
C) $3.12.
D) $4.79.
E) $3.70.

Question

Quizplus · Accepted Answer

Step 1: Calculate the total equivalent units
Units completed and transferred out = 65,000
Units in ending WIP = 15,000
Total equivalent units = 65,000 + (15,000 * 0.80) = 76,000

Step 2: Compute the total direct materials cost
Beginning inventory = $57,500
Direct materials cost incurred during December = $183,000
Total direct materials cost = $57,500 + $183,000 = $240,500

Step 3: Calculate the direct materials cost per equivalent unit
Direct materials cost per equivalent unit = Total direct materials cost / Total equivalent units
Direct materials cost per equivalent unit = $240,500 / 76,000
Direct materials cost per equivalent unit = $3.16 (rounded to the nearest cent)

Using the weighted-average method, we divide the total direct materials cost by the total equivalent units to get the direct materials cost per equivalent unit. Therefore, the correct answer is C) $3.12.

During December, the Production Department of a Process Operations System