ABC, Inc. produces AB1951 using a continuous manufacturing process and accounts
ID: 2505285 • Letter: A
Question
ABC, Inc. produces AB1951 using a continuous manufacturing process and accounts for production costs using process costing. Raw materials are added at the beginning of the production process and conversion takes place continuously throughout the production process. The November 1 work-in-process inventory consists of 20,000 gallons of AB1951 that were started, but not completed, in October. The following data were collected for the month of November, 2012:
Date
Inventory
Gallons
Materials Percent Complete
Conversion Percent Complete
11/1
Work-in-Process
20,000
100%
40%
11/30
Work-in-Process
40,000
100%
80%
11/30
Transferred to Finished Goods
100,000
100%
100%
Costs for the month of November were:
Raw materials $420,000
Conversion $248,000
Total $668,000
Required:
1. Compute the number of gallons added to work-in-process inventory in November
2. Compute the cost of work-in-process inventory on November 30.
3. Compute the cost of the goods transferred to finished goods inventory on November 30.
Date
Inventory
Gallons
Materials Percent Complete
Conversion Percent Complete
11/1
Work-in-Process
20,000
100%
40%
11/30
Work-in-Process
40,000
100%
80%
11/30
Transferred to Finished Goods
100,000
100%
100%
Explanation / Answer
1.Compute the number of gallons added to work-in-process inventory in November
100,000 + 40,000 - 20,000 = 120,000
answer: 120,000
2.Compute the cost of work-in-process inventory on November 30.
raw materials:
140,000 equivalent units
420,000/140,000 = $3 per EU
3*40,000 = $120,000
conversion:
40,000*.8 + 100,000 = 132,000 equivalent units
248,000/132,000 = $1.878787 per EU
40,000*.8*1.878787 = $60,121
$120,000 + 60,121 = 180,121
answer: $180,121
3.Compute the cost of the goods transferred to finished goods inventory on November 30.
668,000 - 180,121 = 487,879
answer: $487,879
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