Zuniga Ltd uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: Using the weighted average method, the total transferred-in costs for the month were
A) $38,040
B) $40,600
C) $30,800
D) $33,360

Question

Quizplus · Accepted Answer

The weighted average method calculates the equivalent units of production for direct materials and conversion costs. Since 1,200 units were transferred in, the equivalent units for transferred-in costs will be 1,200. The cost per equivalent unit for transferred-in costs will be the total transferred-in costs divided by the equivalent units, which is $38,040/1,200 = $31.70. The total transferred-in costs for the month will then be the cost per equivalent unit multiplied by the total units started and transferred in, which is $31.70 x 1,200 = $40,600. Therefore, the best choice is B.

Zuniga Ltd Uses a Process Costing System