Use the information below to answer the following question(s).Waldorf Computer Systems, Inc.manufactures computer memory cards, and uses process-costing.All direct materials are added at the inception of the production process.The accounting department noted that there was no beginning inventory for January.Direct Materials purchases totalled $150,000 during the month.Work-in-process records revealed that 7,500 cards were started in January, 4,500 cards were complete, and 1,500 units were spoiled as expected.Ending work-in-process units are complete in respect to direct materials costs.Inspection occurs at the end of the process.
-What are the Waldorf Computer Systems Inc.respective direct material costs per equivalent unit assuming spoiled units are counted when computing output in equivalent units, and when not counting spoiled units in the equivalent unit total?
A)$15.00; $20.00
B)$20.00; $25.00
C)$25.00; $30.00
D)$30.00; $35.00
E)$35.00; $40.00

Question

Quizplus · Accepted Answer

To calculate the direct material cost per equivalent unit, we need to first calculate the equivalent units of production, both with and without counting the spoiled units.

Equivalent units of production:
- Complete units: 4,500
- Ending work-in-progress units (100% complete with respect to direct materials): 3,000

Total equivalent units of production:
- Including spoiled units: 8,250 (4,500 + 3,000 + 750)
- Excluding spoiled units: 7,500 (4,500 + 3,000)

Direct materials cost per unit:
- Including spoiled units: $150,000 / 8,250 = $18.18
- Excluding spoiled units: $150,000 / 7,500 = $20.00

Therefore, the respective direct material costs per equivalent unit are $18.18 when counting spoiled units and $20.00 when not counting spoiled units.

The best choice is B because it provides both answers correctly.

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