Question

Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about the July activities:

On July 1:
Beginning inventories 850 units, 60% complete
Direct materials cost $5,000
Conversion costs $4,000
During July:
Number of units started 15,000
Direct materials added $155,000
Conversion costs added $83,520
On July 31:
Ending inventories 1,600 units, 40% complete
Using the FIFO method and rounding cost per unit to the nearest whole dollar, the cost of goods completed and transferred out during July was
a. $227,270
b. $236,905
c. $228,200
d. $223,400

Answer 1

d. $223,400

Step-by-step explanation:

beginning WIP 850 units 60%

units started 15,000 units

ending WP 1,600 units at 40%

finished units: 850 + 15,000 - 1,600 = 14,250

started and completed during the period:

14,250 - 850 = 13,400

Direct materials:

Equivalent units: 15,000

Cost per equivalent unit: 155,000 / 15,000 = 10.33

Transferred outs:

850 units $ 5,000

13,400 at $ 10 each = $ 134,000

Total $ 139,000

Conversion Cost:

Equivalent units:

13,400 + 1,600 x 40% + 850 x 40% = 14,380

Cost per equivalent unit: 83,520 / 14,380 = 5.8080 = 5.81

Cost per equivalent unti: 5.81 + 10.33 = 16.14 = 16

Transferred-out:

beginning $ 9,000

13,400 x $16 $ 214,400

223,400