Not Lazy chair company manufacturers a standard recliner. During April, the firm
ID: 2461258 • Letter: N
Question
Not Lazy chair company manufacturers a standard recliner. During April, the firm's Assembly Department started production of 74,000 chairs. During the month, the firm completed 79,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Not Lazy. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs. Beginning inventory: Direct materials $34,000 Conversion costs $45,000 Manufacturing costs added during the accounting period: Direct materials $178,000 Conversion costs $288,000 6) How many of the units that were started and completed during April? What were the equivalent units for conversion costs during April? What is the cost of the goods transferred out during April?
Explanation / Answer
How many units that were started and completed during April?
Answer :
Begining Inventory = 15,000
Units Added = 74,000
Units Transfered Out = 79,000
Closing Inventory = 10,000
Begining Work in Progress - Conversion Costs = 30%
Closing Work in Progress - Conversion Costs = 80%
Hence number of Units started and completed during the month = 79,000 -15,000 = 64,000
What were the equivalent units for conversion costs during April?
Answer :
Equivalent units under FIFO method are the number of finished units that could have been prepared in a process during a period had there been no unfinished units.
Equivalent units for each cost component = (100% - A) * B + C + D * E
A = Percenatge of completion at the end of last period
B = Units in Opening Work in progress
C = Units started and transfered out
D = Percentage of completion of units in Closing Work in progress
E = Units in Closing Work in Progress
Hence Equivalent units for conversion costs = (100% - 30%)*15,000 + 64,000 + 10,000 * 80%
= 70% * 15,000 + 64,000 + 10,000 * 80%
= 10,500 + 64,000 + 8,000
= 82,500 units
What is the Cost of goods transferred out in April?
Answer:
Total cost for the month = Begining inventory cost + cost added during the accounting period
Direct Material Cost = $34,000 + $178,000 = $212,000
Conversion Cost = ( $45,000 * 70/30 ) + $288,000 * 80%
= $105,000 + $230,400
= $335,400
Hence total cost of goods transferred during April = $212,000 + $335,400 = $547,400
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