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Direct material cost per equivalent unit is $1.10 and there are 2000 physical units 100% complete with respect to materials what are the total costs if these 2000 physical units are 50% complete with respect to conversion and conversion costs are 3.75 per equivalent unit? A) $4950 B) $5950 C) $6950 D) None of the above
Expert Answer
While using equivalent units approach to valuation of inventory we need to mutiply the equivalent units with their equivalent unit rates. As such the total cost = 2000 * 1.10 + 1000 * 3.75 = 5950 ……….option B is the correct one
Material units = 2000 given and 2000 is taken in equation because ………..100% complete
Converstion = 2000 given and 1000 is taken in equation because …………50% complete
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