1. Azalea\'s Totes makes fashion handbags out of leather. The manufacturing take
ID: 2530397 • Letter: 1
Question
1. Azalea's Totes makes fashion handbags out of leather. The manufacturing takes place in two departments: the cutting department and the sewing department. The cutting department cuts the leather into pieces, bundles the pieces for each handbag into a unit and sends the bundles to the sewing department. Then the sewing department sews the pieces into the finished products with zippers, buckles and decorative pieces added Azalea's uses a process costing system to determine its product costs. All materials for each department are added at the beginning of the process, and conversion costs are added evenly throughout The following details are available for May production in the sewing department Beginning work-in-process (WIP) inventory Number of tote bundles Direct materials Conversion cost Transferred-in cost Per cent completion 300 $3,825 $2,250 $7,500 50% May activity 3,500 3,400 65% Number of totes transferred from cutting Number of totes completed Per cent completion of ending inventory Transferred-in cost, direct materials cost and conversion cost per equivalent unit have not changed from the previous period. The company uses the weighted average method What is the cost of the handbags transferred out of the sewing department for the month of May? a) $68,850 b) $94,350 c) $153,850 d) $179,350Explanation / Answer
Solution:
As cost per equivalant unit not changed from previous period, therefore cost per equivalant unit will remain the same for this year also.
Completed units = 3400 units
Cost of handbags transferred out of the sewing department = 3400 * ($25+ $12.75 + $15) = $179,350
Hence option d is correct.
Computation of Equivalent unit in opening WIP - Sewing Department Particulars Physical Units Prior Department Cost Material Conversion Closing WIP: 300 Prior deparment cost (100%) 300 Material (100%) 300 Conversion (50%) 150 Equivalent units of production 300 300 300 150Related Questions
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