Question

Cranford Company completed and transferred out 2,700 units in May 2016. There were 300 units in the Work-in-Process Inventory on May 31, 2016, 30% complete as to conversion costs and 100% complete as to materials. The month's charges for conversion costs and material costs were $11,160 and $8,700, respectively. There was no beginning inventory on May 1, 2016. What is the cost of the work transferred-out during May? $19,860.

Answer 1

Answer:

The cost of the work transferred-out during May is $18,630

Explanation:

For computing the cost of work transferred, first we have to compute the conversion cost per unit and material cost per unit

The conversion cost per uni = Conversion cost ÷ (transferred units + work in progress)

= $11,160 ÷ (2,700 + 300 × 30%)

= $11,160 ÷ (2,700 + 90)

= $11,160 ÷ 2,790

= $4 per unit

Now, material cost per unit = Material cost ÷ (transferred units + work in progress)

= $8,700 ÷ (2,700+300)

= $8700 ÷ 3,000

= $2.9 per unit

So, total cost of the work transferred is equals to

= Transferred units × conversion cost per unit + transferred units × material cost per unit

= 2,700 × $4 + 2,700 × $2.9

= $10,800 + $7,830

= $18,630

Hence, the cost of the work transferred-out during May is $18,630