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Gholson, Inc. employs a process costing system in which direct materials are added at the beginning of the process. Direct material costs from the prior period for beginning work in process are $1,250. The current period's direct material costs total $31,500. The company began the period with 500 units, 70% complete, started 10,500 units, and finished the period with 1,000 units, 40% complete.
-Using the weighted average method, the direct material cost per equivalent unit for the period is
A) $3.00
B) $2.98
C) $3.20
D) $2.55

Question

Quizplus · Accepted Answer

The direct material cost per equivalent unit is calculated as follows:Direct material cost per equivalent unit = (Beginning work in process + Current period's direct material costs) / (Equivalent units of production)Equivalent units of production = Units started + (Units in ending work in process * % complete)Equivalent units of production = 10,500 + (1,000 * 40%) = 10,900Direct material cost per equivalent unit = ($1,250 + $31,500) / 10,900 = $2.98

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