Question

For August, Kimbrell Manufacturing has costs in BWIP equal to 112,500. During August, the cost incurred was450,000. Using the weighted average method, Kimbrell had 125,000 equivalent units for August. There were 100,000 units transferred out during the month. What is the cost of goods transferred out?

1) $112,500
2) $450,000
3) $125,000
4) Cannot be determined

Answer 1

The cost of goods transferred out is calculated by adding the beginning work in process ($112,500) to the cost incurred during the period ($450,000), dividing by equivalent units (125,000) to get the cost per equivalent unit ($4.50), and then multiplying by the units transferred out (100,000) to get $450,000. correct answer is option 2.

Step-by-step explanation:

To calculate the cost of goods transferred out using the weighted average method, we combine the beginning work in process costs with the costs incurred during the period to find a total cost. We then divide this by the equivalent units to find the cost per equivalent unit. This cost per equivalent unit is then multiplied by the units transferred out to find the cost of goods transferred out.

So, the total costs for the period are the beginning work in process ($112,500) plus costs incurred during the period ($450,000), resulting in total costs of $562,500. Next, we calculate the cost per equivalent unit as $562,500 divided by 125,000 equivalent units, which equals $4.50 per equivalent unit. Finally, the cost of goods transferred out is 100,000 units multiplied by the cost per equivalent unit ($4.50), which equals $450,000.