CMA Study Group

Mack Inc. uses a weighted-average process costing system. Direct materials and conversion costs are incurred evenly during the production process. During the month of October, the following costs were incurred. 

Direct materials $39,700 

Conversion costs 70,000 

The work-in-process inventory as of October 1 consisted of 5,000 units, valued at $4,300, that were 20% complete. During October, 27,000 units were transferred out. Inventory as of October 31 consisted of 3,000 units that were 50% complete. The weighted-average inventory cost per unit completed in October was 

A.

$3.51

B.

$3.88

C.

$3.99

D.

$4.00

The correct answer is D:- $4.00 per EUP
Since this is Weighted average cost method, beginning numbers will take at 100%
Total cost = Beginning cost + Incurred during the year = 4300 + 39700 + 70000 = 114000
Total Equivalent units =  Units completed during the year + % of ending inventory completed
= 27000 + 50% * 3000 = 28500
Cost per EUP= 114000/28000 = $ 4.00 

Usually, the calculation of DM and conversion cost is done separately, but in this question, % completed provided is same and not different. so we will do the calculation together.