Answer the following questions using the information below:
The Rest-a-Lot chair company manufacturers a standard recliner.During February, the firm's Assembly Department started production of 75,000 chairs.During the month, the firm completed 80,000 chairs, and transferred them to the Finishing Department.The firm ended the month with 10,000 chairs in ending inventory.There were 15,000 chairs in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is used by Rest-a-Lot.Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs.Beginning inventory:
Manufacturing costs added during the accounting period:

-What is the Rest-a-Lot company amount of direct materials cost assigned to ending work-in-process inventory at the end of February?
A)$19,200
B)$22,400
C)$25,600
D)$22,500
E)$21,000

Question

Answer the following questions using the information below:
The Rest-a-Lot chair company manufacturers a standard recliner.During February, the firm's Assembly Department started production of 75,000 chairs.During the month, the firm completed 80,000 chairs, and transferred them to the Finishing Department.The firm ended the month with 10,000 chairs in ending inventory.There were 15,000 chairs in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is used by Rest-a-Lot.Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs.Beginning inventory:
  Manufacturing costs added during the accounting period:
 
-What is the Rest-a-Lot company amount of direct materials cost assigned to ending work-in-process inventory at the end of February?
A)$19,200 
B)$22,400 
C)$25,600 
D)$22,500 
E)$21,000

Quizplus · Accepted Answer

Using the FIFO method, we assume that the units completed are those that were started first. Therefore, we can use the following formula to calculate direct materials cost assigned to ending work-in-process inventory:

Direct materials cost per equivalent unit = Total direct materials costs / Total equivalent units 
Total equivalent units = Units transferred to finished goods + Ending work-in-process units

Total direct materials costs = Beginning inventory direct materials costs + Direct materials costs added during the accounting period 
Total equivalent units = Units transferred to finished goods + Ending work-in-process units

Beginning inventory direct materials costs = (15,000 units × 100% complete) × $8 per unit = $120,000 
Direct materials costs added during the accounting period = $360,000 
Units transferred to finished goods = 80,000 units 
Ending work-in-process units = 10,000 units × 80% complete = 8,000 equivalent units

Total direct materials costs = $120,000 + $360,000 = $480,000 
Total equivalent units = 80,000 units + 8,000 units = 88,000 equivalent units

Direct materials cost per equivalent unit = $480,000 / 88,000 equivalent units = $5.45

Direct materials cost assigned to ending work-in-process inventory = 8,000 equivalent units × $5.45 per equivalent unit = $43,600 
Therefore, the answer is B) $22,400

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