Question

1. 1. Purchased $90 million in direct materials.
2. 2. Incurred direct labor costs of $55 million.
3. 3. Determined that manufacturing overhead was $88 million.
4. 4. Transferred 80 percent of the materials purchased to work-in-process.
5. 5. Completed work on 80 percent of the work-in-process. Costs are assigned equally across all work-in-process.
6. 6. The inventory accounts have no beginning balances. All costs incurred were debited to the appropriate account and credited to Accounts Payable.

Required:

Give the amounts for the following items in the Work-in-process account: (Do not round your intermediate calculations. Enter your final answers in millions rounded to 2 decimal places.)

  

A. Transfers-in (TI)

B. Transfers-Out (TO)

C. Ending Balance (EB)

Answer 1

Answer with explanation

Work in Progress Account

Particulars ( Work in progress)	Cost in million
a. Total transfer In
Direct material used            ( 90 million * 80%)	72
Add : Direct labor cost	55
Add: Manufacturing cost	88
Total Cost transfer in	215
b. Transfer out     Work completed     = Total transfer in * work complete     = $ 215 million * 80%	(172)
C. Ending balance (EB) = ($ 215 * 20%)	43

When 80% work completed i.e. 20 % is Ending Balance

a. Transfer in (TI)

Title of cost	Cost
Direct material used ( 90 million * 80%)	72 million
Add: Direct labour cost	55 million
Add: Manufacturing overheads	88 million
Total Cost transfer in	215 million

Direct material 80% used for production that mean transferred to work in progress.

And direct labor cost and manufacturing cost actual amount incurred whatever provided.

b. Transfer Out (TO)

Transfer out mean which goods complete process and transferred in finished goods. Transfer out find on the basis of complete work of work in progress.

      = Total cost of transfer in multiply by percentage of work completed.

Total cost of transfer in	215 million
* percentage of work completed	80%
Total Transfer Out Cost	172 million

c. Ending Balance (EB)

Ending balance is deference between Transfer In minus Transfer out.

Ending balance is inventory end of the period on which all process is not over i.e. 100 % not completed.

Total Cost transfer in	215 million
Less: Total Transfer Out Cost	172 million
Cost of Ending Balance (EB)	43 million