The May Corporation uses a process system. During the current period, 3100 units were started and 1900 units were completed and transferred out. Ending units were 80% complete for materials and 45% complete for conversion costs. Direct materials costs added were $35,405 and conversion costs added were $32,870. There was no beginning WIP Inventory and conversion costs are added evenly throughout the process. At the end of the period, the total equivalent units for direct materials are
A)3730.
B)4220.
C)1700.
D)3100.

Question

Quizplus · Accepted Answer

The direct materials costs added during the period are used to calculate the cost per equivalent unit for indirect materials. 
Direct Materials Cost per EU = $35,405/ 1900 EU = $18.63 
Total Equivalent Units for DM = EU completed and transferred out + (Ending WIP * % complete) 
Total Equivalent Units for DM = 1900 + (3100 - 1900) * 0.80 = 1900 + 600 = 2500 
Total Direct Materials Cost = $18.63 * 2500 = $46,575 
Therefore, the total equivalent units for direct materials are 4220.

The May Corporation Uses a Process System