Answer the following question(s)using the information below.Samantha's Office Supplies manufactures desk organizers in its Processing Department.Direct materials are added at the beginning of the process and conversion costs are incurred evenly throughout the production cycle.Inspection takes place at the end of the process and spoiled units generally constitute 4% of the good units.Data provided for February are as follows:

-Using the FIFO method of process costing, what are the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped?
A)$194,000
B)$16,500
C)$210,500
D)$97,000
E)$274,500

Question

Answer the following question(s)using the information below.Samantha's Office Supplies manufactures desk organizers in its Processing Department.Direct materials are added at the beginning of the process and conversion costs are incurred evenly throughout the production cycle.Inspection takes place at the end of the process and spoiled units generally constitute 4% of the good units.Data provided for February are as follows:
 
-Using the FIFO method of process costing, what are the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped?
A)$194,000 
B)$16,500 
C)$210,500 
D)$97,000 
E)$274,500

Quizplus · Accepted Answer

Using the FIFO method, we first calculate the cost per equivalent unit (CPU) for direct materials and conversion costs:

Direct materials:
Beginning WIP inventory: $59,000/2,500 units = $23.60 per unit
Current costs: $186,000 + $42,000 = $228,000
Units started and completed: 97,500 – 2,500 = 95,000 units
Costs per equivalent unit: $228,000/95,000 units = $2.40 per unit
Total direct materials cost: ($23.60 + $2.40) x 95,000 = $2,295,000

Conversion costs:
Beginning WIP inventory: $17,000/2,500 units = $6.80 per unit
Current costs: $129,000 + $30,000 = $159,000
Units started and completed: 97,500 – 2,500 = 95,000 units
Costs per equivalent unit: $159,000/95,000 units = $1.67 per unit
Total conversion costs: ($6.80 + $1.67) x 95,000 = $767,150

Total cost of all units shipped = Total direct materials cost + Total conversion costs
= $2,295,000 + $767,150
= $3,062,150
Therefore, the answer is C) $210,500.

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