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 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, 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 units that were transferred out of the Mixing Department and into the Refining Department.

Quizplus · Accepted Answer

To calculate the cost of the units transferred out, we need to use the equivalent units and the costs per equivalent unit for direct materials and conversion costs.

First, we calculate the equivalent units for direct materials and conversion costs for the units completed and the units in process:
Equivalent units for direct materials:
Completed units: 32,000 liters
Units in process: 8,000 liters × 100% = 8,000 liters
Total equivalent units for direct materials: 32,000 + 8,000 = 40,000 liters

Equivalent units for conversion costs:
Completed units: 32,000 liters
Units in process: 8,000 liters × 70% = 5,600 liters
Total equivalent units for conversion costs: 32,000 + 5,600 = 37,600 liters

Next, we calculate the total cost for direct materials and conversion costs:
Total cost for direct materials: 40,000 equivalent units × $1.20 per equivalent unit = $48,000
Total cost for conversion costs: 37,600 equivalent units × $5.75 per equivalent unit = $216,800

Finally, we add the total costs for direct materials and conversion costs to get the total cost of units transferred out:
Total cost of units transferred out: $48,000 + $216,800 = $264,800

However, since we are only looking for the cost of the units transferred out of the Mixing Department and into the Refining Department, we need to multiply the total cost by the percentage of completed units (32,000/40,000) to get the cost of the completed units:
Cost of completed units transferred out: $264,800 × 0.8 (80% completion) = $211,840

Therefore, the best choice is C, $222,400, which is the closest answer choice to our calculated cost of completed units transferred out.

LDR Manufacturing Produces a Pesticide Chemical and Uses Process Costing