Question

Pacific Ink had beginning work-in-process inventory of $744,960 on October 1. Of this amount, $304,920 was the cost of direct materials and $440,040 was the cost of conversion. The 48,000 units in the beginning inventory were 30 percent complete with respect to both direct materials and conversion costs.

During October, 102,000 units were transferred out and 30,000 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 $2,343,600 for direct materials and $3,027,840 for conversion.

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

Answer 1

Requirement a-1:

Cost of goods transferred out	$ 5,247,600
Cost of ending inventory	$     868,800

Working:

Equivalent Units of Production (EUP)-FIFO Method
	Units	% Materials	EUP-Materials	% Conversion	EUP-Conversion
Beginning work in process inventory	48000	70%	33600	70%	33600
Units completed [102000-48000]	54,000	100%	54,000	100%	54,000
Ending work in process inventory	30,000	80%	24,000	40%	12,000
Equivalent units of production			111,600		99,600
Cost per Equivalent unit of production			Materials		Conversion
Units started during October			$     2,343,600		$         3,027,840
Total costs		Costs	$    2,343,600	Costs	$        3,027,840
÷ Equivalent units of production		EUP	111,600	EUP	99,600
Cost per equivalent unit of production			$21.00		$30.40
Total Costs to Account for:
Units completed and transferred:
Cost of Beginning WIP
Materials	$     304,920
Conversion Cost	$     440,040
Total (i)	$     744,960
Cost to complete Begnning WIP
Materials [33600*21]	$     705,600
Conversion Cost [33600*30.40]	$ 1,021,440
Total (ii)	$ 1,727,040
Cost of Units Started and Transferred
Materials [54000*21]	$ 1,134,000
Conversion [54000*30.40]	$ 1,641,600
Total (iii)	$ 2,775,600
Total completed and transferred(i+ii+iii)	$ 5,247,600
Ending work in process inventory:
Materials [24000*21]	$     504,000
Conversion [12000*30.40]	$     364,800
Total (iv)	$     868,800
Total cost accounted for (i)+(ii)+(iii)+(iv)	$ 6,116,400