Question

LO 5.3Direct material costs $3 per unit, direct labor costs $5 per unit, and overhead is applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred to the next department if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory?

$1,000
$13,000
$130,000
$20,000

Answer 1

value of inventory transferred = $130,000

so correct option is C. $130,000

Step-by-step explanation:

given data

material costs = $3 per unit

direct labor costs = $5 per unit

overhead rate = 100% of direct labor cost

beginning inventory = 2000 units

started = 9000 units

ending inventory = 1000 units

to find out

value of the inventory transferred to the next department

solution

first we get here Overhead applied that is express as

Overhead applied = direct labor cost × 100% ..........................1

put here value

Overhead applied = 5 × 100%

Overhead applied = $5

and cost per unit will be

Cost per unit = Direct material costs + direct labor costs + Overhead .................2

put here value we get

Cost per unit = $3 + $5 + $5

Cost per unit = $13

now we get here inventory transferred to next department will be as

inventory transferred = beginning inventory + started - ending inventory ..............3

inventory transferred = 2,000 + 9,000 - 1,000

inventory transferred = 10,000 units

so value of the inventory transferred will be as

value of inventory transferred = inventory transferred × Cost per unit ...........4

put here value we get

value of inventory transferred = 10000 × $13

value of inventory transferred = $130,000

so correct option is C. $130,000