Use this information about Penny, Inc. to answer the questions that follow.

Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about the July activities:

-Using the FIFO method, the cost per equivalent unit for materials used during July was
A) $10.78
B) $10.33
C) $9.78
D) $10.65

Question

Use this information about Penny, Inc. to answer the questions that follow.
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Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about the July activities:
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-Using the FIFO method, the cost per equivalent unit for materials used during July was
A) $10.78 
B) $10.33 
C) $9.78 
D) $10.65

Quizplus · Accepted Answer

To calculate the cost per equivalent unit for materials, we need to divide the total cost of materials used during July by the equivalent units of materials used during July. 
Total cost of materials used during July = $41,320 
Equivalent units of materials used during July = (13,870 units transferred out x 1) + (3,930 units in ending inventory x 100% complete) = 17,800 
Cost per equivalent unit for materials used during July = $41,320 ÷ 17,800 = $10.33 (rounded to the nearest cent)

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