Gholson Ltd 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

First, we need to calculate equivalent units of production for direct material costs:

Beginning work in process: 500 units x 70% complete = 350 units
Current period: 10,500 units x 100% complete = 10,500 units
Ending work in process: 1,000 units x 40% complete = 400 units

Total equivalent units of production = 350 + 10,500 + 400 = 11,250 units

Next, we need to calculate the total direct material costs:

Beginning work in process: $1,250
Current period: $31,500

Total direct material costs = $1,250 + $31,500 = $32,750

Finally, we can calculate the direct material cost per equivalent unit:

Direct material cost per equivalent unit = $32,750 ÷ 11,250 units = $2.98

Therefore, the best choice is B, $2.98.

Gholson Ltd Employs a Process Costing System in Which Direct