Question

Trek Company has the following production data for April: units transferred out 40,000 and ending work in process 5,000 units that are 100% completed for material and 40% complete for conversion costs. If unit materials cost is $4 and unit conversion cost is $7, determine the cost to be assigned to the units transferred out and the units in ending work in process.

Answer 1

Concepts and reason

Process costing: It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

Process cost report: It is the report which consists of information regarding the cost, units produced, and transferred to the next process.

Transferred out costs: It refer to the production cost of the previous process. These costs are incurred in the production of the previous process. These costs are brought to the next process to calculate the total production cost. The transferred in costs include the cost of direct materials and the conversion cost of the previous process.

Work-in process costs: It is the cost of production process that are used to manufacture partially completed products. It includes the cost of raw materials, labor, and overhead that incurred for the production process of the products at various stages.

Fundamentals

Costs assign to units transferred out: It refers to the cost of units that are completed in one processing department and then moved to the next processing department for further process till the units are ready to be sold.

Conversion costs: It refers to the cost of converting the raw materials into finished goods. It is the summation of direct labor and all the manufacturing overhead.

Material costs: It is the cost of raw material used for the production of a product.

Use the following formula to calculate cost assign to units transferred out:

Cost assign to ending work-in process: It refers to the costs of units that could not converted into the finished goods in the current period.

Use the following formula to calculate cost assign to ending work-in process:

Calculate the cost of assign to units transferred out as below:

Hence, the cost assigned to units transferred out is $440,000.

Calculate cost assign to ending work-in process as below:

Hence, the cost assigned to ending work-in process is $34,000.

Ans:

Cost assigned to units transferred out is $440,000.

Cost assigned to ending work-in process is $34,000.