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 units completed and transferred out using the weighted average method would be closest to:
A) $63,866.40
B) $65,000.00
C) $76,000.00
D) $79,833.00

Question

Quizplus · Accepted Answer

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

Materials:
Completed units = 8,000
Ending in process inventory = 4,000
Total equivalent units = 12,000
(7,000 beginning inventory + 36,000 April costs) / 12,000 equiv. units = $3.25 per equivalent unit
Total cost of materials = 12,000 equiv. units x $3.25 per equiv. unit = $39,000

Conversion:
Completed units = 8,000
Ending in process inventory = 4,000 x 50% = 2,000
Total equivalent units = 10,000
(4,000 beginning inventory + 40,000 April costs) / 10,000 equiv. units = $4.40 per equivalent unit
Total cost of conversion = 10,000 equiv. units x $4.40 per equiv. unit = $44,000

Therefore, the total cost of units completed and transferred out would be:
$39,000 materials + $44,000 conversion = $83,000

Using the weighted average method, we would divide this total cost by the total equivalent units:
($83,000) / (8,000 completed units + 4,000 ending inventory units x 150% equivalent units) = $63.866.67

Rounded to the nearest cent, the value of units completed and transferred out is $63,866.40, which is closest to choice A.

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