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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 Rolling Department of Keystone Steel Company are $60 and $10, respectively. The equivalent units to be assigned costs are as follows:

Equivalent Units
  Direct Materials Conversion
Inventory in process, beginning of period 0 320
Started and completed during the period 7,500 7,500
Transferred out of Rolling (completed) 7,500 7,820
Inventory in process, end of period 1,000 300
Total units to be assigned costs 8,500 8,120

The beginning work in process inventory had a cost of $25,000. Determine the cost of completed and transferred-out production and the ending work in process inventory.

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 KS.

Explanation

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

Particulars Direct Material Costs (A) Conversion Costs (B) Total Costs (A + B)
Inventory in process, Opening of period $25,000
Add: Inventory in process, to Complete (1) 0 $3,200 $3,200
 Started and completed during the period $450,000 $75,000 $525,000
Transferred out of Rolling (Completed) $553,200

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=320 units ×$10=$3,200 (1)

Calculate started and completed during the period of direct material cost and conversion costs as shown below:

To determine

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

To determine

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

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