Question

W Corporation uses the FIFO method of process costing. At the beginning of the period, there were 500 units in process that were 40% complete as to conversion costs and 100 percent complete as to direct materials costs. During the current period, 4,300 units were started and completed. Ending inventory contained 320 units that were 80 percent complete as to conversion costs and 100 percent as to direct materials costs. Costs for beginning inventory were $2,300 for direct materials and $6,200 for conversion. Costs from the current period were $21,252 for direct materials and $150,536 for conversion. The cost to manufacture a unit during the current period was _____. A. $35.21 B. $35.60 C. $35.79 D. $39.50

Z Company manufactures wooden, hand-carved figurines and uses a job order costing system. Last month on the “Pine” job, 180 units were made with 400 direct labor hours worked and $4,500 of direct materials used and $6,000 of direct labor used. Last month on the “Oak” job, 100 units were made with 200 direct labor hours worked and $2,700 of direct materials used and $3,000 of direct labor used. Last month on the “Cherry” job, 80 units were made with 140 direct labor hours worked and $2,000 of direct materials used and $2,100 of direct labor used. Manufacturing overhead cost is applied to job orders on the basis of direct labor hours at a predetermined rate of $10 per hour. The “Pine” and “Oak” jobs were completed during the month, and the “Cherry” job remained in work-in-process at the end of the month. The cost transferred to Finished Goods Inventory during the month was _____.

• A. $22,200

• B. $20,300

• C. $16,200

• D. $27,700

• E. none of the above

Answer 1

Solution 1:

W Corporation
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	500
Units started this period	4620
Total unit to be accounted for	5120
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 60%	500	0	300
Started and completed currently	4300	4300	4300
Transferred to finished goods	4800	4300	4600
Units in ending WIP Material - 100% Conversion - 80-%	320	320	256
Total units accounted for	5120	4620	4856

W Corporation
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$171,788.00	$21,252.00	$150,536.00
Equivalent units		4620	4856
Cost per equivalent unit		$4.60	$31.00

The cost to manufacture a unit during the current period = $4.60 + $31 = $35.60

Hence option B is correct.

Solution 2:

The cost transferred to finished goods inventory during the month = Cost of Pine and Oak

Computation of Job Cost
Particulars	Pine	Oak	Total
Direct material	$4,500.00	$2,700.00	$7,200.00
Direct labor	$6,000.00	$3,000.00	$9,000.00
Manufacturing overhead Applied	$4,000.00	$2,000.00	$6,000.00
Total	$14,500.00	$7,700.00	$22,200.00

Hence option A is correct.