In: Accounting
Chae Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were:
Materials costs were $7,100 and Percent complete was 75% Conversion Costs was $5,700 and Percent complete was 25%.
A total of 8,100 units were started and 7,500 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Materials costs were $136,800, Conversion Costs was $322,400
The ending inventory was 80% complete with respect to materials and 75% complete with respect to conversion costs. Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
The total cost transferred from the first processing department to the next processing department during the month is closest to:
Answer A: $486,614 Answer B: $472,000 Answer C: $459,200 Answer D: $424,373
Solution:
Computation of Equivalent unit of Production - Weighted Average - First Processing Department | |||
Particulars | Physical Units | Material | Conversion |
Unit completed & Transferred out | 7500 | 7500 | 7500 |
Closing WIP: | 1100 | ||
Material (80%) | 880 | ||
Conversion (75%) | 825 | ||
Equivalent units of production | 8600 | 8380 | 8325 |
Computation of Cost per equivalent unit of Production - Weighted Average - First Processing Department | ||
Particulars | Material | Conversion |
Opening WIP | $7,100.00 | $5,700.00 |
Cost Added during month | $136,800.00 | $322,400.00 |
Total cost to be accounted for | $143,900.00 | $328,100.00 |
Equivalent units of production | 8380 | 8325 |
Cost per Equivalent unit | $17.172 | $39.411 |
Computation of Cost of ending WIP and units completed & transferred out - Weighted Average - First Processing Department | |||
Particulars | Material | Conversion | Total |
Equivalent unit of Ending WIP | 880 | 825 | |
Cost per equivalent unit | $17.172 | $39.411 | |
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit) | $15,111 | $32,514 | $47,626 |
Units completed and transferred | 7500 | 7500 | |
Cost of units completed & Transferred (Unit completed * cost per equivalent unit) | $128,789 | $295,586 | $424,374 |
Therefore total cost transferred from the first processing department to the next processing department during the month is closest to $424,373
Therefore option D is correct.