Question

The following is an account for a production department, showing its costs for one month:Goods in Process InventoryBalance 5,400 Direct materials 21,600 Direct labor 16,200 Overhead 10,800 Assume that materials are added at the beginning of the production process and that direct labor and overhead are applied uniformly. If the units in ending goods in process inventory cost $4,590, and the started and completed units cost $41,850, what was the cost of completing the units in the beginning goods in process inventory?A. $12,150B. $2,160C. $7,560D. $54,000E. $37,260

Answer 1

Answer: The correct answer is "B. $2,160."

Explanation: First we must calculate the total costs

Total cost = Goods in process inventory + Direct materials + Direct labor + Overhead.

Total cost = $5400 + $21600 + $16200 + $10800 = $ 54000.

Then the total transferred out =

Total transferred out = Total cost - units in the final inventory of goods in process.

Total transferred out = $54000 - $4590 = $49410.

Now we must know the beginning goods in process transferred out =

BGIP Transfered = Total transfered out - units started and completed.

BGIP Transfered = $49410 - $41850 = $7560

And finally we calculate the cost to complete the begining goods in process inventory which is =

Cost to complete BGIP = BGIP transfered out - Goods in Process Inventory Balance.

Cost to complete BGIP = $7560 - $5400 = $2160