Question

"The production supervisor estimates that the ending work-in-process is 16 percent complete. Compute the cost of paint transferred to finished goods and the amount in work-in-process ending inventory as of July 31"

Answer 1

Complete Question:

Sanchez & Company produces paints. On July 1st it had no work in progress inventory. It starts reduction of 150,000 gallons of paint in July and completes 120000 gallons. The cost of the resources used by Sanchez in July consists of the following:

Materials- $137000

Conversion Costs- $175000

"The production supervisor estimates that the ending work-in-process is 16 percent complete. Compute the cost of paint transferred to finished goods and the amount in work-in-process ending inventory as of July 31"

Cost of paint transferred to finished goods__________

Work-in-process ending inventory_________

Answer

The Cost of Paint Transferred to Finished = $300,000

Work-in-Process Ending Inventory = $12,000

Explanation:

Given

Materials = $137,000

Conversion Costs = $175,000

Started = 150,000 gallons

Completed = (120,000) gallons

Ending Work in Progress = 150,000 - 120,000

Ending Work in Progress = 30,000

To calculate cost of paint transferred out and ending inventory of work in progress,

First we'll need to calculate the cost per unit of a paint(gallon)

This is given by: total cost ÷ total unit.

Calculating Total Cost:

Total Cost = $137,000 + $175,000

Total Cost = $312,000

Calculating Total Units:

Ending Work in Progress = : 16% complete ----- Given

So, Ending Work in Progress = 16% * 30,000 = 4,800

Total Completed Unit is then given by: 120,000 gallon + 4,800

Total = 124,800

Calculating Cost per unit

If the total cost is $312,000 then a unit will cost

$312,000/124,800

Cost per unit = $2.5/unit

Finally,

The Cost of Paint Transferred to Finished Goods is calculated by:

Total Units Transferred out = 120,000 gallons

Cost = 120,000 * $2.5

Cost = $300,000

Work-in-Process Ending Inventory is calculated by:

Ending Inventory = 4,800 ----- calculated

Work in Process Ending Inventory = 4,800 * $2.5

Work in Process = $12,000