Question

Pacific Ink had beginning work-in-process inventory of $1,005,960 on October 1. Of this amount, $423,500 was the cost of direct materials and $582,460 was the cost of conversion. The 61,000 units in the beginning inventory were 30 percent complete with respect to both direct materials and conversion costs.

During October, 128,000 units were transferred out and 43,000 remained in ending inventory. The units in ending inventory were 80 percent complete with respect to direct materials and 40 percent complete with respect to conversion costs. Costs incurred during the period amounted to $3,314,300 for direct materials and $4,022,730 for conversion.

Exercise 8-40 (Algo) Assign Costs to Goods Transferred Out and Ending Inventory: FIFO Method (LO 8-2, 5)

a-1. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method.

a-2. Is the ending inventory higher or lower under the weighted-average method compared to FIFO?

Can someone break down how to do this for me? Thank you

Answer 1

a-1
Cost of Goods transferred out = $7006550
Cost of ending inventory = $1336440

	Physcial units	Materials	Conversion
Work in Process Beginning	61000
Started during the period	171000
To account for	232000
Work in Process Beginning	61000	42700	42700
Units started and completed	67000	67000	67000
Units transferred to next department	128000	109700	109700
Ending Work in Process :	43000	34400	17200
Accounted for	171000
Equivalent units		144100	126900
	Materials	Conversion	Total
Cost added during the period	$       3,314,300	$         4,022,730	$      7,337,030
Equivalent units of Production	144100	126900
Cost per equivalent unit	$              23.00	$                 31.70	$              54.70
	Materials	Conversion	Total
Ending work in Process Inventory
Equivalent units of Production	34400	17200
Cost per equivalent unit	$              23.00	$                 31.70
Cost of Ending work in Process Inventory	$          791,200	$            545,240	$      1,336,440
	Materials	Conversion	Total
Units Completed and transferred out
Cost of Beginning Work in Process	$          423,500	$            582,460	$      1,005,960
Cost of work on Beginning Work in Process	$          982,100	$         1,353,590	$      2,335,690
Total Cost of Beginning WIP	$       1,405,600	$         1,936,050	$      3,341,650
Units started and completed	67000	67000
Cost per equivalent unit	$              23.00	$                 31.70
Cost of units started and completed	$       1,541,000	$         2,123,900	$      3,664,900
Cost of units transferred out	$      2,946,600	$         4,059,950	$      7,006,550

a-2
Ending Inventory is higher under the weighted-average method.

	Physical units	Material	Conversion
Work in Process Beginning	61000
Started during the period	110000
To account for	171000
Units transferred	128000	128000	128000
Work in Process Ending	43000	34400	17200
Accounted for	171000
Equivalent units		162400	145200
	Material	Conversion	Total
Cost of Beginning Work in Process	$          423,500	$            582,460	$      1,005,960
Cost added during the period	$       3,314,300	$         4,022,730	$      7,337,030
Total Cost	$       3,737,800	$         4,605,190	$      8,342,990
Equivalent units of Production	162400	145200
Cost per equivalent unit	$              23.02	$                 31.72	$              54.73
	Material	Conversion	Total
Ending work in Process Inventory
Equivalent units of Production	34400	17200
Cost per equivalent unit	$              23.02	$                 31.72
Cost of Ending work in Process Inventory	$          791,751	$            545,518	$      1,337,269