Question

The costs per equivalent unit of direct materials and conversion in the Rolling Department of Kraus Steel Company are $0.75 and $2.65, respectively. The equivalent units to be assigned costs are as follows: Equivalent Units Direct Materials Conversion Inventory in process, October 1 2,000 50,000 Started and completed during October Transferred out of Rolling (completed) Inventory in process, October 31 50,000 50,000 4,000 54,000 52,000 1,600 Total units to be assigned costs 53,600 The beginning work in process inventory on October 1 had a cost of $1,260. Determine the cost of completed and transferred-out production, the ending work in process inventory, and the total costs assigned by the Rolling Department. Completed and transferred-out production Inventory in process, October 31 Total costs assigned by the Rolling Department

Answer 1

Assumption:

1. Begining work in process is included in completed and transferred production.

2. Begining Cost is included in calculation of equivalent units.

Formula = equivalent unit × rate.

A. Completed and transferred out production

Direct material = 50,000×$0.75 = $37,500.

Conversion = 52,000×$2.65 = $1,37,800.

Total amount for completed and transferred out = $175,300.

Note : we have to ignore beginning cost as it is included in calculation of equivalent units.

B. Inventory in process

Direct Material = 4000×$0.75=$3000

Conversion = 1600×$2.65=$4240.

C. Total cost assigned by rolling department

Direct material cost A + cost B

$ 37,500 + $ 3000 = $40,500.

Conversion cost A + cost B

$ 137800 + $ 4240 = $142040.