Answer the following questions using the information below:
Triboro Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $200,000 during the month. Work-in-process records revealed that 8,000 card units were started in January, 4,000 card units were complete, and 3,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.
-What are the respective direct material costs per equivalent unit, assuming spoiled units are recognized or ignored?

Question

Quizplus · Accepted Answer

To calculate the respective direct material costs per equivalent unit, we need to first calculate the equivalent units of production for direct materials. We have 4,000 complete card units and 3,000 spoiled card units, which gives us a total of 7,000 card units.

Ignoring spoiled units:
Direct materials cost per equivalent unit = $200,000 / 8,000 card units 
= $25.00 per equivalent unit

Recognizing spoiled units:
Direct materials cost per equivalent unit = $200,000 / 7,000 card units 
= $28.57 per equivalent unit

Therefore, the respective direct material costs per equivalent unit are $25.00 if we ignore spoiled units or $28.57 if we recognize them. The best choice is B, as it provides both answers, with an explanation of how they were calculated.

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