Complete Question:
Sanchez & Company produces paints. On July 1st it had no work in progress inventory. It starts reduction of 150,000 gallons of paint in July and completes 120000 gallons. The cost of the resources used by Sanchez in July consists of the following:
Materials- $137000
Conversion Costs- $175000
"The production supervisor estimates that the ending work-in-process is 16 percent complete. Compute the cost of paint transferred to finished goods and the amount in work-in-process ending inventory as of July 31"
Cost of paint transferred to finished goods__________
Work-in-process ending inventory_________
Answer
The Cost of Paint Transferred to Finished = $300,000
Work-in-Process Ending Inventory = $12,000
Explanation:
Given
Materials = $137,000
Conversion Costs = $175,000
Started = 150,000 gallons
Completed = (120,000) gallons
Ending Work in Progress = 150,000 - 120,000
Ending Work in Progress = 30,000
To calculate cost of paint transferred out and ending inventory of work in progress,
First we'll need to calculate the cost per unit of a paint(gallon)
This is given by: total cost ÷ total unit.
Calculating Total Cost:
Total Cost = $137,000 + $175,000
Total Cost = $312,000
Calculating Total Units:
Ending Work in Progress = : 16% complete ----- Given
So, Ending Work in Progress = 16% * 30,000 = 4,800
Total Completed Unit is then given by: 120,000 gallon + 4,800
Total = 124,800
Calculating Cost per unit
If the total cost is $312,000 then a unit will cost
$312,000/124,800
Cost per unit = $2.5/unit
Finally,
The Cost of Paint Transferred to Finished Goods is calculated by:
Total Units Transferred out = 120,000 gallons
Cost = 120,000 * $2.5
Cost = $300,000
Work-in-Process Ending Inventory is calculated by:
Ending Inventory = 4,800 ----- calculated
Work in Process Ending Inventory = 4,800 * $2.5
Work in Process = $12,000
