During December, the production department of a process operations system completed and transferred to finished goods a total of 59,000 units of product. At the end of December, 15,000 additional units were in process in the production department and were 50% complete with respect to materials. The beginning inventory included materials cost of $60,100 and the production department incurred direct materials cost of $190,800 during December. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

Cost per equivalent unit = cost / total equivalent units

To determine the direct material cost per equivalent unit, we follow the steps below

Step 1

Determine the total equivalent units

Item Workings Equivalent unit (E.U)

Finished good 100% × 59,000 = 59,000

Closing WIP 50% × 15,000 = 7,500

Total equivalent unit 66,500

Step 2

Determine the cost per equivalent unit

Total direct material cost = $ (60,100 + 190,800)

= $ 250,900

Direct material cost per equivalent unit

= 250,900/66, 500 E.U

= $3.77

Direct material cost per equivalent unit = $3.77