Question

Department G had 2,280 units 25% completed at the beginning of the period, 12,500 units were completed during the period, 1,900 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period: Work in process, beginning of period $31,400 Costs added during period: Direct materials (12,120 units at $9) 109,080 Direct labor 75,000 Factory overhead 25,000 All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. What is the total cost of 2,280 units of beginning inventory which were completed during the period (round unit cost calculations to four decimal places and round your final answer to the nearest dollar)? a. $42,513 b. $45,291 c. $31,400 d. $47,191

Answer 1

Opening Work in progress = 2280 units, 25% complete

Cost of work in progress = $31,400

Direct labor = $75,000

Factory overhead = $25,000

Opening work in progress is 25% complete, which means 75% work has to be added during the period to make it completed units. Therefore proportionate amount of conversion costs (direct labor plus factory overhead) have to be added to the cost of opening work in progress to get the total cost of 2280units of opening inventory. For allocation of direct labor and factory overhead we have to calculate the equivalent units of production during the period. It is assumed that material is 100% complete in respect of 2280 units.

Calculation of equivalent completed units

	Physical units	Work added this period	Equivalent units
Opening Work in progress	2280 units	75%	1710 units
Started and completed	10220	100%	10220 units
Total completed during the period	12500 units
Closing work In progress	1900 units	20%	380 units
Total	14400 units		12310 units

Direct labor                           = $75,000

Factory overhead                 = $25,000

Total conversion cost          = $ 100000

Conversion cost per unit = Total conversion cost / equivalent units of production        

                                                = $100000/ 12310 units

                                                = $ 8.1235/unit

Therefore total cost of 2280 units = $31,400 + ($8.1235*1710equivalent completed units)

                                                                                = $31400+$13891

                                                                                = $ 45291

Correct answer is option B