LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2014, the first department, Mixing, had no beginning inventory. During January, 40,000 fl. oz. of chemicals were started in production. Of these, 32,000 fl. oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process. At the end of January, the equivalent unit data for the Mixing Department were as follows: In addition to the above, the costs per equivalent unit were $1.20 for direct materials and $5.75 for conversion costs. Using this data, calculate the cost of the units that were transferred out of the Mixing Department and into the Refining Department.

Question

LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2014, the first department, Mixing, had no beginning inventory. During January, 40,000 fl. oz. of chemicals were started in production. Of these, 32,000 fl. oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process. At the end of January, the equivalent unit data for the Mixing Department were as follows:  In addition to the above, the costs per equivalent unit were $1.20 for direct materials and $5.75 for conversion costs. Using this data, calculate the cost of the units that were transferred out of the Mixing Department and into the Refining Department.

Quizplus · Accepted Answer

The cost of the units transferred out of the Mixing Department can be calculated as follows:

Cost per equivalent unit = Direct materials cost per equivalent unit + Conversion costs per equivalent unit
Cost per equivalent unit = $1.20 + $5.75
Cost per equivalent unit = $6.95

Equivalent units completed and transferred out = 32,000 fl. oz.

Cost of units transferred out = Cost per equivalent unit x Equivalent units completed and transferred out
Cost of units transferred out = $6.95 x 32,000
Cost of units transferred out = $222,400

Therefore, the correct answer is (C) $222,400.

LDR Manufacturing Produces a Pesticide Chemical and Uses Process Costing