Hendrix Ltd employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the FIFO method, the cost of goods completed and transferred out during July was
A) $225,150
B) $225,060
C) $213,300
D) $213,000

Question

Quizplus · Accepted Answer

To calculate the cost of goods completed and transferred out, we need to use the FIFO method. As direct materials are added at the beginning of the process, we can calculate the total cost of goods started in July by adding the direct materials cost and the conversion costs (direct labor and overhead cost).

Total cost of goods started = Direct materials cost + Conversion costs
= $100,000 + $170,700
= $270,700

Next, we need to subtract the cost of goods in ending work in process inventory from the total cost of goods started to get the cost of goods completed and transferred out.

Cost of goods completed and transferred out = Total cost of goods started - Cost of goods in ending work in process inventory
= $270,700 - ($17,640 + $28,000)
= $225,060

Therefore, the best choice is B, with a cost of goods completed and transferred out of $225,060.

Hendrix Ltd Employs a Process Costing System