Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the FIFO method, the cost per equivalent unit for materials used during July was
A) $10.78
B) $10.33
C) $9.78
D) $10.65

Question

Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities:  Using the FIFO method, the cost per equivalent unit for materials used during July was
A) $10.78 
B) $10.33 
C) $9.78 
D) $10.65

Quizplus · Accepted Answer

To calculate the cost per equivalent unit for materials used during July using the FIFO method, we need to calculate the total cost of materials used during July and divide it by the total equivalent units of materials used during July.
Total cost of materials used during July = $56,952 + $665 = $57,617
Total equivalent units of materials used during July = 5,560 + (1,355 * 0.6) = 6,330
Cost per equivalent unit for materials used during July = $57,617 ÷ 6,330 = $9.10 + $1.23 = $10.33 (rounded to two decimal places)