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Pacific Ink had beginning work-in-process inventory of $985,960 on October 1. Of

ID: 2564771 • Letter: P

Question

Pacific Ink had beginning work-in-process inventory of $985,960 on October 1. Of this amount, $412,500 was the cost of direct materials and $573,460 was the cost of conversion.The 60,000 units in the beginning inventory were 30 percent complete with respect to both direct materials and conversion costs.

During October, 126,000 units were transferred out and 42,000 remained in ending inventory.The units in ending inventory were 80 percent complete with respect to direct materials and 40 percent complete with respect to conversion costs. Costs incurred during the period amounted to $3,186,000 for direct materials and $3,943,680 for conversion.

a-1. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method. (Round intermediate calculations to 2 decimal places.)

Cost of goods transferred out

Cost of ending inventory

Explanation / Answer

Pacific Ink Cost of Production Report For the M/o October FIFO Method Particulars Equivalent Units Physical Units Materials Conversion Costs Units to be accounted for Work in process - Beginning                                  60,000 Started into production - 168,000 - 60,000                                108,000 Total units                                168,000 Units accounted for Goods Units Completed & transferred out (126,000 Units) : From Beginning WIP                                  60,000                                  42,000               42,000 (70% materials, 70% conversion costs) Started & Completed (126,000 - 60,000)                                  66,000                                  66,000               66,000 Work in process, Ending                                  42,000                                  33,600               16,800 (80% materials, 40% conversion costs) Equivalent units accounted for                                168,000                                141,600             124,800 Materials Conversion Costs Total Total Cost to Account for: WIP, Beginning                                412,500                                573,460             985,960 Cost added in current period                            3,186,000                            3,943,680         7,129,680 Total cost to be account for                            3,598,500                            4,517,140         8,115,640 Cost added in current period                            3,186,000                            3,943,680         7,129,680 Equivalent Units of work done in current Period                                141,600                                124,800 Cost per Equivalent Unit                                     22.50                                     31.60                  54.10 Assignment of Costs: Goods Units and Completed out (126,000 Units) WIP, Beginning - 60,000 Units                                412,500                                573,460             985,960 Cost added to Beg. WIP in Current period                                945,000                            1,327,200         2,272,200 (42,000 Nos X $22.50) (42,000 Nos X $31.60) Total of Beginning Inventory                            1,357,500                            1,900,660         3,258,160 Started and completed - 66,000 Units                            1,485,000                            2,085,600         3,570,600 (66,000 Nos X $22.50) (66,000 Nos X $31.60) Total Cost of good units completed & transferred out                            2,842,500                            3,986,260         6,828,760 WIP, Ending - 42,000 Units                                756,000                                530,880         1,286,880 (33,600 Nos X $22.50) (16,800 Nos X $31.60) Total Cost accounted For                            3,598,500                            4,517,140         8,115,640 Cost of Goods Transferred Out - 126,000 Units                            6,828,760 Cost of Ending Inventory - 42,000 Units                            1,286,880