The Completion Department transferred 8,000 units to the finished goods storeroom during a month.There was no beginning work in process inventory,but 1,000 units were still in process at the end of the month,and were 40% complete.Inventory costs at the end of the month were $3.50.What were total production costs for the month?

Question

Quizplus · Accepted Answer

Total production costs can be calculated as follows:
Total Units = Units Transferred to finished goods + Units still in process
Total Units = 8000 + (1000 * 40%) = 8000 + 400 = 8400
Cost per unit = Ending inventory cost / Units still in process
Cost per unit = $3.50 / 1000 * 40% = $0.14
Total production costs = Cost per unit * Total Units
Total production costs = $0.14 * 8400 = $1,176
Total production costs = Direct materials + Direct labor + Manufacturing overhead
Direct materials + Direct labor = Total production costs - Manufacturing overhead
Assuming that manufacturing overhead was incurred equally throughout the production process, we can use the weighted average method to calculate the cost per unit for direct materials and direct labor.
Weighted Average Cost per Unit = Total Production Costs / Total Units
Weighted Average Cost per Unit = $1,176 / 8400 = $0.14
Direct materials cost per unit = Weighted Average Cost per Unit * % of materials in each unit
Direct materials cost per unit = $0.14 * 60% = $0.084
Direct labor cost per unit = Weighted Average Cost per Unit * % of labor in each unit
Direct labor cost per unit = $0.14 * 30% = $0.042
Total production costs = Direct materials + Direct labor + Manufacturing overhead
Total production costs = ($0.084 + $0.042) * 8400 + Manufacturing overhead
Total production costs = $1,050.00 + Manufacturing overhead
Manufacturing overhead = Total production costs - Direct materials - Direct labor
Manufacturing overhead = $1,176 - ($0.084 + $0.042) * 8400
Manufacturing overhead = $117.60
Total production costs = ($0.084 + $0.042) * 8400 + $117.60
Total production costs = $29,400.00.

Therefore, the best choice is B.

The Completion Department Transferred 8,000 Units to the Finished Goods