Question

Pantanal, Inc., manufactures car seats in a local factory. For costing purposes. It uses a first in, first out (HFO process costing system The factory has three departments: Molding. Assembling, and Finishing. Following is information on the beginning work in process inventory in the Assembling Department on August 1: Degree of Completion Costs Work-in-process beginning inventory (11,600 Transferred-in from Molding Direct materials costs Conversion costs Work-in-process balance (August 1) $ 99,000 170,400 62,eee $331,400 During August, 104,000 units were transferred in from the Malding Department at a cost of $2,194,400 and started in Assembling. The Assembling Department incurred other costs of $946,670 in August as follows: Direct materials costs Conversion costs Total August costs August Costs $795,000 151,670 $946,670 At the end of August, 12,000 units remained in inventory that were 80 percent complete with respect to direct materials and 50 percent complete with respect to conversion Required: Compute the cost of goods transferred out in August and the cost calculations.) work-in-process ending inventory. (Do not round intermediate Cost of goods transferred out Cost of WIP ending inventory < Prex 11 of 12 !! Next >

Answer 1

Cost of goods transferred out	$ 3,138,570
Cost of WIP Ending inventory	$      333,900

Calculation

Step for solution
Step 1	Equivalent Units of production = Physical units multiplied by % of competition
Step 2	Calculate total cost to be accounted for
Step 3	Cost per Equivalent Unit =Cost incurred during Month / Equivalent Units of production
Step 4	Cost assigned to units transferred out = Cost in beginning WIP + Cost incurred for complete beginning WIP + Cost of units in Started and completed
Step 5	Cost assigned to units ending work in progress = equivalent units in ending WIP inventory * Cost per Equivalent Unit
For direct material 60% unit completed in the previous period. It means the remaining 40% completed in this month.
For conversion cost 40% unit completed in the previous period. It means the remaining 60% completed in this month.

Pantanal Inc.
Assembly Department production Report
First in First out (FIFO) Method
Month ended August 31
Summary of Physical units
Units in beginning WIP inventory			11000
Units started during month			104000
Total unit to be accounted for			115000
Units completed and transferred out (115000-12000)			103000
Units in ending WIP inventory			12000
Total unit accounted for			115000
Equivalent Units of production
Particulars	Physical units	Transferred in		Direct material		Conversion Cost
		%	units	%	units	%	units
units in beginning WIP inventory	11000	0%	0	40%	4400	60%	6600
Units in Started and completed (103000-11000)	92000	100%	92000	100%	92000	100%	92000
units in ending WIP inventory	12000	100%	12000	80%	9600	50%	6000
Equivalent Units of production			104000		106000		104600
Summary of cost to be accounted
	Transferred in	Direct material	Conversion Cost	Total
Cost in beginning WIP	99,000	170,400	62,000	331,400
Cost incurred during Month (Add)	2,194,400	795,000	151,670	3,141,070
total cost to be accounted for	2,293,400	965,400	213,670	3,472,470
cost per Equivalent Unit
Cost incurred during Month	2194400	795000	151670
Equivalent Units of production	104000	106000	104600
Cost per Equivalent Unit	$                21.10	$                  7.50	$       1.45	$            30.05
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
Transferred in	$              99,000
Direct material	$            170,400
Conversion Cost	$              62,000
Cost in beginning WIP		$           331,400
Transferred in (0*21.1)	$                       -
Direct material (4400*7.5)	$              33,000
Conversion Cost (6600*1.45)	$                9,570
Cost incurred for complete beginning WIP		$             42,570
Transferred in (92000*21.1)	$        1,941,200
Direct material (92000*7.5)	$            690,000
Conversion Cost (92000*1.45)	$            133,400
Cost of units in Started and completed		$       2,764,600
cost assigned to units transferred out		$       3,138,570
cost assigned to units ending work in progress
Transferred in (12000*21.1)	$            253,200
Direct material (9600*7.5)	$              72,000
Conversion Cost (6000*1.45)	$                8,700
cost assigned to units ending work in progress		$           333,900
Total cost assigned		$       3,472,470