Question

BOGO Inc. has two sequential processing departments, roasting and mixing. At the beginning of the month, the roasting department had 3,080 units in inventory, 70% complete as to materials. During the month, the roasting department started 21,600 units. At the end of the month, the roasting department had 4,800 units in ending inventory, 80% complete as to materials. Cost information for the roasting department for the month follows:
Beginning work in process inventory (direct materials) $ 4,870
Direct materials added during the month 45,900
Using the FIFO method, assign direct materials costs to the roasting department’s output—specifically, the units transferred out to the mixing department and the units that remain in process in the roasting department at month-end. (Do not round intermediate calculations.)

Answer 1

Answer:

Direct material cost of units transferred out = $42,596

Cost of ending work in process inventory = $8,174

Explanation:

This can be done using the following 3 steps:

Step 1: Calculation of equivalent unit of production (EUP) of materials

Note: See the attached excel file for the calculation of equivalent unit of production (EUP) of materials.

From the attached excel file, we have:

Physical unit = 24,680

EUP-material = 21,564

Step 2: Calculation of cost per EUP of materials

Cost per EUP of materials = Direct materials added during the month / EUP-Materials = $49,900 / 21,564 = $2.13

Step 3: Assignment of direct materials cost to the units transferred out amd the ending WIP

Cost of materials added to complete the beginning WIP = 924 * $2.13 = $1,967

Cost of units started and transferred out = 16,800 * $2.13 = $35,760

Direct material cost of units transferred out = Direct material cost of beginning WIP + Cost of materials added to complete the beginning WIP + Cost of units started and transferred out = $4,870 + $1,967 + $35,760 = $42,596

Cost of ending work in process inventory = 3,840 * $2.13 = $8,174

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