Question

In the first month of operations, material costs of $500,000 and conversion costs of $535,500 were charged to a processing department. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. 100,000 units were started into production during the month, and there were 8,000 units in ending work in process that were 30% complete. Given this, the total amount of manufacturing costs assigned to those units that were completed and transferred out during the month is closest to which amount?

a. $990,000.
b. $1,060,000.
c. This is not able to be determined from the provided information.
d. $980,000.
e. $970,000.
f. $1,070,000.

Answer 1

D) $980,000.

Step-by-step explanation:

we need to determine the equivalent units:

• equivalent units for materials = 100,000 since the materials are added at the beginning of the process
• equivalent units for conversion costs = 100,000 units started - 8,000 in ending inventory + (8,000 x 30%) = 94,400 units

materials cost per unit = $500,000 / 100,000 = $5 per unit

conversion cost per equivalent unit = $535,000 / 94,400 equivalent units = $5.6673 per unit

units completed = 100,000 - 8,000 = 92,000

manufacturing costs allocated to units completed = (92,000 x $5.6673) + (92,000 x $5) = $521,398.31 + $460,000 = $981,398.31 ⇒ closest to $980,000