Question

During the current period, Department A finished and transferred 50,000 units to Department B. Of the 50,000 units, 20,000 were one-fifth complete at the beginning of the period and 30,000 were started and completed during the period. Also during the period, 10,000 units were started but brought only to a stage of being three-fifths completed. If the FIFO method is used and $13,000 of overhead was charged to Department A during the period, how much overhead should be allocated to the ending goods in process inventory?A. $1,615B. $3,250C. $2,600D. $2,500E. $1,500

Answer 1

Answer:

Overhead Cost to the Ending WIP Units: $1,500

Explanation:

Beginning WIP Units:      4,000 (20,000 x 20%)

Units Transferred Out:  50,000

Ending WIP Units:            6,000 (10,000 x 60%)

Equivalent Units of Production (FIFO): Units Transferred Out + Equivalent Units in ending WIP - Equivalent Units in Beginning WIP

EUP Overhead: 50,000 + 6,000 - 4,000 = 52,000

Cost per Equivalent Unit (FIFO): Total Cost Incurred in the Period / Equivalent Units of Production  

Cost per EUP Overhead: $13,000 / 52,000 = $0,25

Overhead Cost to the Ending WIP Units: 6,000 x $0,25 = $1,500