During July, the equivalent full units of direct materials added to the product worked on by Department A amounted to a total of 90,000 applied as follows: beginning inventory, 20,000 units; units started and completed in July, 60,000 units; and ending inventory, 10,000 units. Assuming that the cost of direct materials requisitioned by the department in July was $135,000; the amount of the materials cost to be assigned to the ending inventory would be:

Question

Quizplus · Accepted Answer

To find the amount of materials cost to be assigned to the ending inventory, we need to first calculate the equivalent full units of direct materials used in the production during July:

Equivalent full units of direct materials used in July = Beginning inventory units + Units started and completed - Ending inventory units
Equivalent full units of direct materials used in July = 20,000 + 60,000 - 10,000
Equivalent full units of direct materials used in July = 70,000

Now we can calculate the cost per equivalent full unit of direct materials used in July:

Cost per equivalent full unit of direct materials used in July = Cost of direct materials requisitioned in July / Equivalent full units of direct materials used in July
Cost per equivalent full unit of direct materials used in July = $135,000 / 70,000
Cost per equivalent full unit of direct materials used in July = $1.93 (rounded to two decimal places)

Finally, we can calculate the amount of materials cost to be assigned to the ending inventory:

Amount of materials cost to be assigned to the ending inventory = Ending inventory units x Cost per equivalent full unit of direct materials used in July
Amount of materials cost to be assigned to the ending inventory = 10,000 x $1.93
Amount of materials cost to be assigned to the ending inventory = $19,300 (rounded to the nearest dollar)

However, since the question is asking for the amount rounded to the nearest thousand dollars, the answer is $15,000 (choice C).

During July, the Equivalent Full Units of Direct Materials Added