Answer the following questions using the information below:
Triboro Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $200,000 during the month. Work-in-process records revealed that 8,000 card units were started in January, 4,000 card units were complete, and 3,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.
-What is the cost transferred out assuming spoilage units are ignored?

Question

Quizplus · Accepted Answer

The cost transferred out can be calculated by subtracting the ending work-in-process (which is complete in respect to direct materials cost) from the total costs incurred during the month. Therefore, the cost transferred out is:
Total costs incurred = Direct materials purchases + Direct labor + Factory overhead
Since there is no information given about the direct labor and factory overhead for January, we can assume that they are included in the direct materials purchases. Therefore, the total costs incurred are $200,000.
Ending work-in-process card units are complete in respect to direct materials costs. Therefore, all the card units started in January, which are 8,000, are either complete or spoiled. So the cost transferred out is calculated as follows:

Cost transferred out = Total costs incurred - Ending work-in-process
Cost transferred out = $200,000 - 4,000 units (which are complete in respect to direct materials)
Cost transferred out = $160,000

Therefore, the best choice is B, which is the cost transferred out assuming spoilage units are ignored.

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