Hendrix, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities:
On July 1: Beginning inventories = 750 units, 60% complete
Direct materials cost = $5,925
Conversion costs = $4,095
During July: 15,000 units started
Direct materials added = $150,000
Conversion costs added = $83,520
On July 31: Ending inventories = 1,500 units, 40% complete
Using the weighted average method, the number of equivalent units of material was:
A) 15,750
B) 14,250
C) 15,000
D) 13,500

Question

Quizplus · Accepted Answer

The number of equivalent units of material using the weighted average method is calculated by adding the units completed during the period to the equivalent units in ending inventory. Since direct materials are added at the beginning of the process, all units started and in process are considered 100% complete for materials. Therefore, the calculation is 15,000 units started and completed during the period + 750 units from beginning inventory (since they were already 100% complete for materials at the start) + 1,500 units in ending inventory (also considered 100% complete for materials since they are added at the beginning) = 15,000 + 750 + 1,500 = 17,250. However, the correct calculation should consider only the units started and completed during the period plus the equivalent units for the ending inventory, without incorrectly adding the beginning inventory units as they are part of the units started or completed. Thus, the correct calculation is 15,000 units started + 1,500 units in ending inventory = 16,500, which is not an option provided, indicating a mistake in my explanation. The correct approach is to add the units started during the period to the equivalent units for the ending inventory, considering the direct materials are added at the beginning, making all units 100% complete for materials. Therefore, all 15,000 units started are considered, and since materials are added at the beginning, the ending inventory does not affect the calculation of equivalent units for materials, leading to a straightforward count of the units started as the equivalent units for materials. This explanation contains a calculation error. The correct calculation for equivalent units of material, considering materials are added at the beginning, is actually the total units started during the period since they are all 100% complete for materials upon entry, plus any additional units considered for the ending inventory's state of completion for materials. However, since materials are added at the beginning, all units, including those in the ending inventory, are considered 100% complete for materials, making the calculation focus solely on the units started and ignoring the completion percentage of the ending inventory for materials. The correct answer should reflect the total units processed with respect to materials, taking into account the weighted average method's approach to handling beginning inventory and units started during the period.