Cloud Nine International uses a process costing system.Assume that direct materials are added at the beginning of the period and that direct labor and overhead are added continuously throughout the process.The company uses the average costing method.The following data are available for one of its accounting periods:
-Equivalent units for direct materials of Cloud Nine International are

Question

Cloud Nine International uses a process costing system.Assume that direct materials are added at the beginning of the period and that direct labor and overhead are added continuously throughout the process.The company uses the average costing method.The following data are available for one of its accounting periods:  
-Equivalent units for direct materials of Cloud Nine International are

Quizplus · Accepted Answer

The equivalent units for direct materials are calculated by adding the units in process with the units completed and multiplying this total by 100%. The units in process are calculated by multiplying the percentage of completion by the units started. In this case, the units started were 200,000, and the percentage of completion was 90%, so the units in process are 180,000. The units completed were 26,000, so the total equivalent units for direct materials are 180,000 + 26,000 = 206,000. Therefore, the best choice is B.

Cloud Nine International Uses a Process Costing System