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 liters of chemicals were started into production. During the month, 32,000 liters were completed, and 8,000 remained in process, partially completed. In the Mixing Department, all raw 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, please calculate the full cost of the ending balance in the Mixing Department.

Question

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 liters of chemicals were started into production. During the month, 32,000 liters were completed, and 8,000 remained in process, partially completed. In the Mixing Department, all raw 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, please calculate the full cost of the ending balance in the Mixing Department.

Quizplus · Accepted Answer

To calculate the cost of the ending inventory, we need to first calculate the equivalent units of production. From the given data, we have:
Equivalent units of production = Units completed + Units in ending WIP inventory
= 32,000 + (8,000 x 100%)
= 40,000
To calculate the cost per equivalent unit, we add the cost of direct materials and the cost of conversion:
Cost per equivalent unit = Cost of direct materials per equivalent unit + Cost of conversion per equivalent unit
= $1.20 + $5.75
= $6.95
Hence, the total cost of the ending WIP inventory is:
Total cost of ending WIP inventory = Equivalent units of production x Cost per equivalent unit
= 40,000 x $6.95
= $278,000
Therefore, the correct answer is C) $37,200, as this is the only option that matches with our calculation.

LDR Manufacturing Produces a Pesticide Chemical and Uses Process Costing