Process costing Gregg Industries uses three operations in sequence to manufactur

Question

Process costing

Gregg Industries uses three operations in sequence to manufacture an assortment of flower baskets. In each operation, the same procedures, time, and costs are used to perform that operation, regardless of the basket style being produced. During March, a batch of 500 baskets of style D and a batch of 800 baskets of style F were put through the first operation. All materials for a batch are introduced at the beginning of the operation for that batch. The costs shown below were incurred in March for the first operation:

Direct Labor

$4,450

Manufacturing overhead

$3600

Direct Materials

Style D

$1,200

Style F

$2,400

  

There were no inventories at the beginning of the month; 400 units of Style D and 600 units of Style F were transferred to the next operation. The ending inventories were 30% and 60% complete for Styles D and F, respectively.

Required:

What is the total cost of the ending inventory in process for operation #1?

Direct Labor

$4,450

Manufacturing overhead

$3600

Direct Materials

Style D

$1,200

Style F

$2,400

Explanation / Answer

Answer:

Unit costs:

Materials – D= $1,200/500 = $2.40

Materials – F =$2,400/800 = $3.00

Conversion costs ($3,600 + 4,450)/(430 + 720) = $7.00

Ending inventory:

D: 100($2.40) + 30 ($7.00) = $ 450

F: 200($3.00) + 120($7.00) = $1,440

                                           $1,890

D F Equivalent units of Production: Started and completed 400 600 Ending inventory 30 120 Equivalent units of Production 430 720

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