Answer (B) is correct . Direct materials are added when the units are 60% complete as to conversion costs. The beginning inventory of 8,000 units was only 25% complete at the start of the period, and 42,000 units were transferred in. Given that the ending inventory of 12,000 units was only 40% complete, neither beginning nor ending inventory had received direct materials in the assembly department. Accordingly, the equivalent units in the assembly department for direct materials must have been 38,000 units (8,000 units BI + 42,000 units transferred in – 12,000?units EI).
Answer (A) is incorrect because The number of 30,000 units ignores the 8,000 units in process at the beginning of the period.
Answer (C) is incorrect because Equivalent units for conversion costs, not direct materials, is 40,800.
Answer (D) is incorrect because The 42,000 units were transferred in during the month. Not all received an input of direct materials.
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