Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department: Units:Beginning Inventory: 90,000 units, 70% complete as to materials and 20% complete as to conversion. Units started and completed: 270,000.Units completed and transferred out: 360,000.Ending Inventory: 35,000 units, 40% complete as to materials and 15% complete as to conversion. Costs:Costs in beginning Work in Process - Direct Materials: $47,200.Costs in beginning Work in Process - Conversion: $89,700.Costs incurred in October - Direct Materials: $759,920.Costs incurred in October - Conversion: $929,300.Calculate the cost per equivalent unit of materials.
a. $2.80b. $2.50c. $2.04d. $2.36e. $2.16

e. $2.16

Explanation:

Richards Corporation

Weighted-Average Method

Fabricating Department:

Particulars         Units       % of Completion           Equivalent Units

                                    Materials  Conversion  Materials  Conversion

Completed &

transferred out: 360,000    100       100          360,000        360,000

Ending Inv:         35,000     40%        15%         14000            5250    

Equivalent Units                                                  374,000      365250

Costs                                        Direct Materials       Conversion

Beg. Work in Process - :             $47,200                 $89,700

Costs incurred in October -      $759,920              $929,300

Total Costs                                  807,120               1,019,000

Cost Per Equivalent Unit = Total Costs/ Equivalent Units

Cost Per Equivalent Unit Materials = 807120/ 374,000= $ 2.158 ≅$ 2.16

We divide the total costs of Materials with the total Equvilant units of Materials to get Cost Per Equivalent Unit of Materials which is 2.16