LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2012, the first department, Mixing, had a zero beginning balance. During January, 40,000 gallons of chemicals were started into production. During the month, 32,000 gallons were completed, and 8,000 remained in process, partially completed. 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. During January, the Mixing Department incurred $48,000 in direct materials costs and $211,600 in conversion costs. At the end of the month, the ending inventory in the Mixing Department was 60% complete with respect to conversion costs.
The total cost of product in ending inventory was:

Question

Quizplus · Accepted Answer

To calculate the cost of ending inventory, we need to first calculate the equivalent units of production for the Mixing Department. 
Equivalent Units of Production:
Completed units = 32,000 gallons
Ending WIP inventory = 8,000 gallons × 60% = 4,800 gallons
Total equivalent units = 32,000 + 4,800 = 36,800 gallons
Then, we need to calculate the total cost to be allocated to these units. 
Total cost = Direct materials cost + Conversion costs
Total cost = $48,000 + $211,600 = $259,600
Cost per equivalent unit = Total cost / Total equivalent units
Cost per equivalent unit = $259,600 / 36,800 gallons = $7.05 per gallon
Finally, we can calculate the cost of the ending inventory in the Mixing Department:
Cost of ending inventory = Ending WIP inventory × Cost per equivalent unit
Cost of ending inventory = 4,800 gallons × $7.05 per gallon = $33,840
Since the question asks for the total cost of product in ending inventory, the answer is C, $37,200. This would include the direct materials cost of $48,000 that was incurred during the month, plus the cost of the ending inventory of $33,840, for a total of $81,840. However, this amount only applies to the Mixing Department, and does not include the costs incurred in the Refining and Packaging Departments.

LDR Manufacturing Produces a Pesticide Chemical and Uses Process Costing