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1. ABC Inc. is a manufacturing company that uses the
weighted-average method of process costing. In January,
the company started production of 10,000 units and
completed 8,000 units by the end of the month. The ending
work in process inventory was 40% complete with respect
to direct materials and 20% complete with respect to
conversion costs. The total costs incurred during January
were $120,000 for direct materials and $80,000 for
conversion costs. What is the cost per equivalent unit for
direct materials and conversion costs, respectively?
A) $12 and $8
B) $12 and $10
C) $15 and $10*
D) $15 and $12
Rationale: The equivalent units for direct materials are
9,200 (8,000 + 0.4 x 2,000) and the equivalent units for
conversion costs are 8,400 (8,000 + 0.2 x 2,000). The cost
per equivalent unit for direct materials is $120,000 / 9,200
= $15 and the cost per equivalent unit for conversion costs
is $80,000 / 8,400 = $10.
2. XYZ Ltd. is a retailer that uses the perpetual inventory
system and the gross method of recording purchases. On
January 1, XYZ purchased 100 units of inventory from a
supplier for $50 per unit, with terms of 2/10, n/30. On
January 5, XYZ returned 10 units to the supplier due to
defects. On January 9, XYZ paid the supplier in full. What
is the amount of purchase discounts that XYZ should
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