In: Accounting
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.
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