TryFit Co. uses process costing to account for the production of energy food bars. Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. Beginning inventory consisted of $7,000 in materials and $4,000 in conversion costs. April costs were $36,000 for materials and $40,000 for conversion costs. During April 8,000 units were completed. Ending in process inventory was 4,000 units (100% complete for materials, 50% for conversion). The value of ending inventory using the weighted average method would be closest to:
A) $15,966.60
B) $23,133.20
C) $31,933.20
D) $65,000.00

Question

Quizplus · Accepted Answer

First, we need to calculate the equivalent units for materials and conversion costs for April:

Equivalent units for materials = units completed + ending inventory × % complete
= 8,000 + 4,000 × 100%
= 12,000 units

Equivalent units for conversion costs = units completed × 100% + ending inventory × % complete
= 8,000 × 100% + 4,000 × 50%
= 8,000 + 2,000
= 10,000 units

Next, we need to calculate the cost per equivalent unit:

Cost per equivalent unit for materials = (beginning inventory + current period costs) ÷ equivalent units for materials
= ($7,000 + $36,000) ÷ 12,000
= $3.25 per unit

Cost per equivalent unit for conversion costs = (beginning inventory + current period costs) ÷ equivalent units for conversion costs
= ($4,000 + $40,000) ÷ 10,000
= $4.40 per unit

Finally, we can calculate the value of ending inventory:

Value of ending inventory = cost per equivalent unit × equivalent units in ending inventory
= ($3.25 × 4,000) + ($4.40 × 2,000)
= $13,000 + $8,800
= $21,800

Therefore, the closest answer is B) $23,133.20 (rounded to the nearest cent).

TryFit Co Uses Process Costing to Account for the Production of of Energy