Materials costs of $600000 and conversion costs of $642600 were charged to a processing department in the month of September. Materials are added at the beginning of the process while conversion costs are incurred uniformly throughout the process. There were no units in beginning work in process 100000 units were started into production in September and there were 8000 units in ending work in process that were 40% complete at the end of September. What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September?

Question

Quizplus · Accepted Answer

To determine the manufacturing costs assigned to units completed and transferred out, we need to use the weighted average method.

First, we need to calculate the equivalent units of production for both materials and conversion costs.

Equivalent units for materials = Units completed and transferred out + Ending work in process (units) 
= 100,000 + (8,000 x 40%) 
= 103,200

Equivalent units for conversion costs = Units completed and transferred out + Ending work in process (units) x % complete 
= 100,000 + (8,000 x 40%) = 103,200

Next, we calculate the cost per equivalent unit for both materials and conversion costs:

Cost per equivalent unit for materials = Materials cost / Equivalent units for materials 
= $600,000 / 103,200 
= $5.81

Cost per equivalent unit for conversion costs = Conversion costs / Equivalent units for conversion costs 
= $642,600 / 103,200 
= $6.22

Finally, we can calculate the total manufacturing cost assigned to units completed and transferred out:

Total manufacturing cost = Cost per equivalent unit (materials) x Units completed and transferred out + Cost per equivalent unit (conversion) x Units completed and transferred out 
= $5.81 x 100,000 + $6.22 x 100,000 
= $1,162,000 + $622,000 
= $1,743,000

However, we need to subtract the cost of ending work in process from this total, since those units were not completed and transferred out in September. To do this, we need to calculate the cost of the ending work in process using the cost per equivalent unit for conversion costs:

Cost of ending work in process = Cost per equivalent unit (conversion) x Ending work in process units x % complete 
= $6.22 x 8,000 x 40% 
= $19,872

Therefore, the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September is:

$1,743,000 - $19,872 = $1,173,000

The answer is B.

Materials Costs of $600000 and Conversion Costs of $642600 Were