Black Company uses the weighted-average method in its process costing system. The company's ending work in process inventory consists of 5,000 units, 80% complete with respect to materials and 50% complete with respect to labor and overhead. If the total dollar value of the inventory is $60,000 and the cost per equivalent unit for labor and overhead is $8.00, the cost per equivalent unit for materials must be:
A) $5.00
B) $10.00
C) $8.00
D) $4.00

Question

Quizplus · Accepted Answer

The total cost of the inventory is $60,000. The equivalent units for labor and overhead are 5,000 units * 50% = 2,500 units. The cost for labor and overhead is 2,500 units * $8.00 = $20,000. Therefore, the cost for materials is $60,000 - $20,000 = $40,000. The equivalent units for materials are 5,000 units * 80% = 4,000 units. Thus, the cost per equivalent unit for materials is $40,000 / 4,000 units = $10.00.

Black Company Uses the Weighted-Average Method in Its Process Costing