Williams Company computed its cost per equivalent unit for direct materials to be $2.60 and its cost per equivalent unit for conversion to be $3.75. A total of 250,000 units of product were completed and transferred out as finished goods during the month, and 36,000 of equivalent units remained unfinished at the end of the month. The amount that should be reported in Finished Goods Inventory is:
A) $135,000.
B) $1,816,100.
C) $228,600.
D) $1,587,500.
E) $650,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost of the goods that were completed and transferred out:
250,000 units x ($2.60 direct materials + $3.75 conversion) = $1,587,500

Then, we need to calculate the cost of the equivalent units that remained unfinished at the end of the month:
36,000 equivalent units x $2.60 direct materials = $93,600
36,000 equivalent units x $3.75 conversion = $135,000

The total cost that should be reported in Finished Goods Inventory is the cost of the completed and transferred out units:
$1,587,500

Therefore, the best answer is D.

Williams Company Computed Its Cost Per Equivalent Unit for Direct