Question

Austin Corporation started its production operations on January 1. During January, the Mixing Department completed 20,000 units. There were 5,200 units in ending inventory which were 70% complete with respect to materials and 15% complete with respect to conversion costs. This created equivalent units for materials of 23,640 and equivalent units for conversion of 20,780. During January, the department accumulated materials costs of $56,928 and conversion costs of $81,523. Calculate the cost of ending inventory.

$8,772

$3,057

$11,830

$5,200

Answer 1

Correct answer----$11830

Calculations

Statement of Equivalent Units
				Material		Conversion Cost
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred	20,000			100%	20,000	100%	20,000
Closing WIP	5,200			70%	3,640	15%	780
Total	25,200			Total	23,640	Total	20,780

Cost per Equivalent Units
COST		Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost				$                 -
Cost incurred during period		$             56,928	$        81,523	$    1,38,451
Total Cost to be accounted for		$             56,928	$        81,523	$    1,38,451
Total Equivalent Units		23,640	20,780
Cost per Equivalent Units		$                 2.41	$             3.92

Statement of cost
Cost	Equivalent Cost/unit	Ending WIP
		Units	Cost Allocated
Material	$ 2.41	3,640	$          8,772
Conversion Cost	$ 3.92	780	$          3,058
		TOTAL	$        11,830