Question

In a department, 28,000 units are completed and transferred out and 14,400 remain in ending WIP at 85% complete. If an equivalent unit costs $8.00 for direct materials, what is the value of materials transferred out?

Answer 1

Answer:

The value of materials transferred out is $224,000

Explanation:

The condition for the units for transferred is that they must have been completed 100% with respect to equivalent unit cost,hence the materials transferred out should be valued at full $8.00 per direct material.

The value of materials transferred out=28,000*$8.00

                                                              =$224,000

The value of WIP=$8.00*85%*14,400

                           =$97,920

The closing WIP of $97920  would be the beginning inventory in production next period an would ultimately form part of materials completed and transferred next period.