Question

During April, the production department of a process operations system completed and transferred to finished goods 18,000 units that were in process at the beginning of April and 90,000 units that were started and completed in April. April's beginning inventory units were 100% complete with respect to materials and 40% complete with respect to labor. At the end of April, 30,000 additional units were in process in the production department and were 100% complete with respect to materials and 60% complete with respect to labor. The beginning inventory included materials cost of $107,000 and the production department incurred direct materials cost of $329,000 during the month. Compute the direct materials cost per equivalent unit for the department using the weighted-average method

Answer 1

Answer:

Cost per equivalent unit of materials = $3.16

Explanation:

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

Cost per equivalent unit = cost / total equivalent units

Total units completed and transferred out= 18,000 + 90000= 108,000

Items                    Unit                                                         Equivalent unit

Completed units    108,000         100% × 108,000 =     108,000

Closing inventory   30,000          100%  ×  30,000 =     30,000

Total equivalent unit of material                                    138,000

Cost per equivalent unit = Total cost/Total equivalent unit

=    (107,000 + 329,000) /138,000 units

= $3.16