Question

The following is an account for a production department, showing its costs for one month:

Goods in Process Inventory

Balance 6,300
Direct materials 22,500
Direct labor 17,100
Overhead 11,700


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 $5,490, and the started and completed units cost $42,750, what was the cost of completing the units in the beginning goods in process inventory?

a) $14,850.
b) $9,360.
c) $3,060.
d) $57,600.
e) $37,260.

Answer 1

option (b) $9,360

Explanation:

Given:

Goods in Process Inventory

Balance = $6,300

Direct materials = $22,500

Direct labor = $17,100

Overhead = $11,700

The cost of units in ending goods in process inventory = $5,490

The cost of started and completed units = $42,750

Now,

The cost of total Goods in Process Inventory will be

= Balance + Direct materials + Direct labor + Overhead

= $6,300 + $22,500 + $17,100 + $11,700

= $57,600

also,

Cost of units to be transferred out

= cost of total Goods in Process Inventory - ( cost of units in ending goods in process inventory )

= $57,600 - $5,490

= $52,110

Thus,

Cost of Completed Goods in Beginning Inventory

= Cost of units to be transferred out - cost of started and completed units

= $52,110 - $42,750

= $9,360

Hence, the answer is option (b) $9,360