Answer the following questions using the information below:
Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for February 2012 are as follows:
Costs:

-What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing?

Question

Answer the following questions using the information below:
Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for February 2012 are as follows:
    Costs:
 
-What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing?

Quizplus · Accepted Answer

Using the FIFO method, the costs of the ending work-in-process inventory include 2,600 units that are 60% complete for direct materials and 50% complete for conversion costs. 
Direct materials: 
Beginning inventory: 300 x $15 = $4,500 
Current period cost: 8,500 x 80% x $16 = $10,880 
Total direct materials cost = $15,380 
Cost assigned to the ending work-in-process inventory: 
2,600 x 60% x $16 = $24,960

Conversion costs: 
Beginning inventory cost: 300 x $25 = $7,500 
Current period cost: 
Direct labor: 8,500 x 80% x $12 = $8,160 
Manufacturing overhead: 8,500 x 80% x $8 = $5,440 
Total conversion costs = $20,100 
Cost assigned to the ending work-in-process inventory: 
2,600 x 50% x $20 = $26,000

Therefore, the costs allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing are $24,960 and $26,000, which is option C.

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