Question

what is the cost of the May 31 inventory?

Exercise 16-3 The ledger of American Company has the following work in process account. Work In Process-Painting 5/1 Balance 3,690 5/31 Transferred out 5/31 Materials 5,740 5/31 Labor 2,830 5/31 Overhead 1,280 5/31 Balance ? Production records show that there were 500 units in the beginning inventory, 30% complete, 1,680 units started, and 1,440 units transferred out. The beginning work in process had materials cost of $2,540 and conversion costs of $1,150. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.

Answer 1

Units 500 Units to be accounted for Work in process inventory, May 1 (Material - 100% completed, Conversion - 30% completed) Started into production during May Total Units Units Recorded as follows Transferred to Next department Work in process inventory, May 31 (Material - 100% completed, Conversion - 40% completed) Total Equivalent Units 1680 2180 Units 1440 Material 1440 Conversion 1440 296 740 740 (2180 - 1440) 2180 2180 1736 Total Cost 3690 Material 2540 Conversion 1150 4110 9850 5740 Cost to be accounted for Work in process inventory, May 1 Cost Added during May Total Cost Total Equivalent Units Cost per Equivalent unit 13540 8280 5260 2180 1736 3.80 3.03 #1 Unit Conversion cost for May 3.03 #2 Total cost of units transferred in May (1440 * 3.8) + (1440 *3.03) 9832 #3 Total Cost of may 31 inventory (740 * 3.8) + (296 * 3.03) 3708 Or Opening inventory cost + Cost during May #3 Total Cost of may 31 inventory - Cost of Transferred units 3690 + 5740 + 2830 + 1280 - 9832 3708 Note: Please Comment down for any further clarifications.