Question

In: Accounting

Betty DeRose, Inc. operates two departments, the handling department and the packaging department. During April, the...

Betty DeRose, Inc. operates two departments, the handling department and
the packaging department. During April, the handling department reported
the following information:

                                           % complete      % complete
                                units         DM           conversion 
work in process, April 1        16,400        75%             66%
units started during April      56,000
work in process, April 30       47,600        82%             40%

The cost of beginning work in process and the costs added during April
were as follows:

                                 DM         Conversion       Total cost
work in process, April 1      $ 25,766       $ 90,794         $116,560
costs added during April       193,245        181,588          374,833
total costs                    219,011        272,382          491,393

Calculate the total cost of the handling department's work in process
inventory at April 30 using the FIFO process costing method.

Solutions

Expert Solution

To calculate the total cost of the handling department's work in process inventory at April 30 using the FIFO process costing method, we will subtract the cost of material sold during april from the total cost at the end of April.

*Number of units sold during April = Opening inventory + Units added during the year - closing inventory = 16400+56000-47600 = 24,800 units

* Opening inventory is 75% complete in DM(75%*16400 = 12300 units) and 66% in Conversion(66%*16400 = 10824 units)

Therefore, Total cost of complete opening inventory(16400 units) = (25766/12300)*16400 + (90794/10824)*16400

= 34355(25766+8589) + 137567(90794+46773)

= $ 171922

Now we need to calculate the total cost incurred on completing remaining 8400 (24800-16400) units during the year :-

Number of units complete in closing stock i.e. 47600 are 82% in DM + 8400 and 40% in Conversion +8400 i.e. 47600*82% + 8400 = 39032+8400 = 47432 in DM

47600*40% + 8400 = 19040+8400 = 27440 in Conversion

Therefore, Total cost incurred on units added during year (56000)(DM) = 193245-8589 = 184656

Cost for 8400 = (184656/47432)*8400 = $ 32702

Total cost incurred on units added during year (56000)(Conversion) = 181588-46773 = 134815

Cost for 8400 = (134815/27440)*8400 = $ 41270

Therefore, Total cost of units sold = 171922 + 32702 + 41270 = $ 245894

Hence Total Cost of closing WIP inventory on FIFO Basis = $ 491,393 - $ 245,894

= $ 245,499


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