Question

A company provides the following data for its process costing system:

Equivalent units for materials	10,000
Material costs for units in beginning inventory	$20,000
Material costs for units started during the period	$80,000
Conversion costs for units in beginning inventory	$30,000
Conversion costs for units started during the period	$80,000

What is the cost per equivalent unit for materials if the weighted average cost method is used?

Answer 1

Solution

Cost per Equivalent Units

$ 10.00

Working

COST		Material
Beginning WIP Inventory Cost		$ 20,000
Cost incurred during period		$ 80,000
Total Cost to be accounted for		$ 100,000
Total Equivalent Units		10,000
Cost per Equivalent Units		$ 10.00

Answer 2

Given:

• Equivalent units for materials = 10,000

• Material costs in beginning inventory = $20,000

• Material costs added during the period = $80,000

• 
  

Calculation (Weighted Average Method):

1. Total Material Costs:

   $$\mathrm{\$}20,000(\text{beginning})+\mathrm{\$}80,000(\text{added})=\mathrm{\$}100,000$$

3. Cost per Equivalent Unit for Materials:

   $$\frac{\text{Total Material Costs}}{\text{Equivalent Units}}=\frac{\mathrm{\$}100,000}{10,000}=\mathrm{\$}10\text{per equivalent unit}$$

Answer:

The cost per equivalent unit for materials is $10.