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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cost of units transferred out and ending work in process

The costs per equivalent unit of direct materials and conversion in the Filling Department of Eve Cosmetics Company are $0.40 and $0.10, respectively. The equivalent units to be assigned costs are as follows:

Equivalent Units
Direct Materials Conversion
Inventory in process, beginning of period 0 1,600
Started and completed during the period 42,000 42,000
Transferred out of Filling (completed) 42,000 43,600
Inventory in process, end of period 8,000 2,000
Total units to be assigned costs 50,000 45,600

The beginning work in process inventory had a cost of $l,800. Determine the cost of completed and transferred-out production and the ending work in process inventory.

a)

To determine

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

Direct materials cost

Manufacturing products arise with raw materials that are altered into finished products. The cost of any material that is an important part of the finished product is categorized as a direct materials cost.

Conversion cost

Cost of changing the materials into a finished product. It includes direct labor costs and factory overhead costs.

To Identify: The cost of completed and transferred out production of Company EC.

Explanation

Determine the cost of completed and transferred out production of Company EC as shown below:

Particulars Direct Material Costs (A) Conversion Costs (B) Total Costs (A + B)
Inventory in process, Opening of period $1,800
Add: Inventory in process, to Complete 0 $160 $160
 Started and completed during the period $16,800 $4,200 $21,000
Transferred out of Filing (Completed) $22,960

Table (1)

Working notes:

Calculate beginning inventory process of Conversion costs as shown below:

Beginning inventory process of Conversion costs)=Beginning inventoryunits ×Conversion cost per unit=1,600 units ×$0

b)

To determine

To Identify: The ending working process inventory for direct material cost and conversion cost of Company EC.

c)

To determine

To Calculate: The total costs assigned by the rolling department of Company EC.

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