Tide Company manufactures greeting cards.Material is introduced at the beginning of the process in the Printing Department.Conversion costs are applied uniformly throughout the process.The weighted-average method of product costing is used.Data for the Printing Department for the month of September follow: Work-in-process inventory,September 1:
With regard to the work-in-process inventory on September 30,materials are 100 percent complete and conversion costs are 60 percent complete.The unit cost for materials is ________.

Question

Tide Company manufactures greeting cards.Material is introduced at the beginning of the process in the Printing Department.Conversion costs are applied uniformly throughout the process.The weighted-average method of product costing is used.Data for the Printing Department for the month of September follow: Work-in-process inventory,September 1:
   With regard to the work-in-process inventory on September 30,materials are 100 percent complete and conversion costs are 60 percent complete.The unit cost for materials is ________.

Quizplus · Accepted Answer

To calculate the unit cost for materials, we need to use the weighted-average method formula:

Unit Cost for Materials = (Cost of Beginning WIP Inventory + Cost of Materials Added During the Period) ÷ Equivalent Units of Materials

Cost of Beginning WIP Inventory = $0 (given)
Cost of Materials Added During the Period = $14,500 (given)

To find the equivalent units of materials, we need to account for the materials in both the beginning WIP inventory and the units started and completed during the month.

Equivalent Units of Materials = (Equivalent Units in Beginning WIP Inventory + Equivalent Units Started and Completed During the Period)

Equivalent Units in Beginning WIP Inventory = 3,000 (given - three units with 100% complete materials)
Equivalent Units Started and Completed During the Period = 7,500 (given)

Equivalent Units of Materials = 3,000 + 7,500 = 10,500

Unit Cost for Materials = ($0 + $14,500) ÷ 10,500 = $1.38

Therefore, the unit cost for materials is $1.38. None of the answer choices match this value.

However, we can use this value to calculate the total cost of materials in the ending WIP inventory:

Total Cost of Materials in the Ending WIP Inventory = Equivalent Units of Materials in Ending WIP Inventory x Unit Cost for Materials

Equivalent Units of Materials in Ending WIP Inventory = 3,500 (three units with 100% complete materials and 60% complete conversion costs)

Total Cost of Materials in the Ending WIP Inventory = 3,500 x $1.38 = $4,830

To find the unit cost for materials, we need to allocate this total cost of materials in the ending WIP inventory to the equivalent units of materials in the ending WIP inventory:

Unit Cost for Materials = Total Cost of Materials in the Ending WIP Inventory ÷ Equivalent Units of Materials in Ending WIP Inventory

Unit Cost for Materials = $4,830 ÷ 3,500 = $1.38 x (100 ÷ 60) = $2.30

Therefore, the unit cost for materials, accounting for the ending WIP inventory, is $2.30. The closest answer choice is B) $3.20, which is incorrect.

Tide Company Manufactures Greeting Cards