Question

Sunset Inc. Plastics Company uses process costing and provided the following information for 2019: Units Percent Complete Percent Complete Direct Materials Conversion Costs Work-in-process at January 1 20,000 40% 60% Units started during year 218,000 Work-in-process at December 31 40,000 70% 40% The cost of the beginning work-in-process included $110,750 for direct materials used and $85,350 for direct labor. Production costs during the year were $793,250 for direct materials and $143,935 for direct labor. The company applies manufacturing overhead using direct labor costs. The manufacturing overhead rate for all years is 40% of direct labor. The cost transferred to finished goods inventory is:

Answer 1

Correct answer---------------$1,089,000

Working

Reconciliation of Units
A	Beginning WIP	20,000
B	Introduced	218,000
C=A+B	TOTAL	238,000
D	Transferred out	198,000
E=C-D	Ending WIP	40,000

.

Statement of Equivalent Units(Weighted average)
				Material		Conversion
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred out	198,000			100%	198,000	100%	198,000
Ending WIP	40,000			70%	28,000	40%	16,000
Total	238,000			Total	226,000	Total	214,000

.

Cost per Equivalent Units (Weighted average)
COST		Material	Conversion	TOTAL
Beginning WIP Inventory Cost (A)		$ 110,750	$ 119,490	$ 230,240
Cost incurred during period (B)		$ 793,250	$ 201,509	$ 994,759
Total Cost to be accounted for (C=A+B)		$ 904,000	$ 320,999	$ 1,224,999
Total Equivalent Units(D)		226,000	214,000
Cost per Equivalent Units (E=C/D)		$ 4.00	$ 1.50	$ 5.50

.

Statement of cost (Weighted average)
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 4.00	28,000	$        112,000.00	198,000	$        792,000.00
Conversion	$ 1.50	16,000	$          24,000.00	198,000	$        297,000.00
TOTAL	$ 1,225,000	TOTAL	$ 136,000	TOTAL	$ 1,089,000