Question

Refresh produces soft drinks and sodas. Production of 100,000 liters was started in February, 85,000 liters were completed. Material costs were $38,220 for the month while conversion costs were $16,380. There was no beginning work-in-process; the ending work-in-process was 40% complete. What is the cost of the product that was completed and transferred to finished goods?

Answer 1

Answer:

Cost transfered to finished goods= $51,000

Explanation:

In this production process the target production was 100,000 litres. In February 85,000 litres was completed.

So the balance uncompleted is 100,000- 85,000= 15,000 litres

Of this 15,000 40% was eventually completed. That is 0.4* 15,000= 6,000 litres

Therefore

Equivalent production= 85,000+ 6,000

Equivalent production= 91,000 litres

Cost per litre = (Material cost+ Conversion cost)/Number of litres

Cost per litre= (38,220+16,380)/91,000

Cost per litre= 54,600/91,000= $0.6

Cost transfered to finished goods= Cost per litre* Completed goods

Cost transfered to finished goods=0.6* 85,000

Cost transfered to finished goods= $51,000

Answer 2

Answer:

$51,000

Explanation:

Equivalent production = 85,000 + [40% × (100,000 - 85,000)] = 91,000 units. Given.

Total Production = 100,00 litres

Completed = 85,000

Material Cost = $38,220

Conversion Cost = 16,380

Beginning work process = 0

End work process = 40%

Uncompleted Production = 100,000 - 85,000 = 15,000

Total Cost = 38,220 + 16,380 = 54,600

First we Calculate the Total Units of Production

This is given by:

Total Units of Production = Completed Production + [40% × (Uncompleted Production)] =

Total Units of Production = 85,000 + [40% × (15,000)]

Total Units of Production = 91,000 units.

Calculating Cost per unit = Total Cost/Total Units

Cost per unit = ($38,220 + $16,380)/91,000

Cost Per Unit = $0.60;

Cost Transferred = Materials Cost * Cost Per Unit

Costs Transferred = 85,000 × $0.60 = $51,000