Cheese Heads Cheddar utilizes a process costing system.The beginning Work in Process Inventory in the Cutting Department consisted of 16,000 units which were 100% complete with respect to materials and 20% complete with respect to conversion costs.The ending Work in Process Inventory consisted of 12,000 units which were 100% complete with respect to materials and 50% complete with respect to conversion costs.The total cost in beginning inventory was $65,000 with an additional $270,400 added during the period.During the month, 62,000 units were transferred out to the next department.The equivalent cost per unit was $1.50 for materials and $3.30 for conversion costs.How much is the total cost of the inventory transferred out during the period?
A)$389,000
B)$224,400
C)$297,600
D)$93,000

Question

Quizplus · Accepted Answer

To calculate the cost of inventory transferred out, we need to calculate the equivalent units of production for materials and conversion costs separately.

For materials:
Equivalent Units = Units completed and transferred out + (Ending WIP x % complete for materials)
Equivalent Units = 62,000 + (12,000 x 100%) = 74,000

Cost per equivalent unit for materials = Total material cost / Total equivalent units
Cost per equivalent unit for materials = ($65,000 + $270,400) / 74,000 = $4.00

Total cost for materials transferred out = Cost per equivalent unit * Equivalent units
Total cost for materials transferred out = $4.00 * 62,000 = $248,000

For conversion costs:
Equivalent Units = Units completed and transferred out + (Ending WIP x % complete for conversion)
Equivalent Units = 62,000 + (12,000 x 50%) = 68,000

Cost per equivalent unit for conversion costs = Total conversion cost / Total equivalent units
Cost per equivalent unit for conversion costs = $3.30

Total cost for conversion costs transferred out = Cost per equivalent unit * Equivalent units
Total cost for conversion costs transferred out = $3.30 * 68,000 = $224,400

Total cost of inventory transferred out during the period = Total cost for materials transferred out + Total cost for conversion costs transferred out
Total cost of inventory transferred out during the period = $248,000 + $224,400 = $472,400
However, since the question is asking for the cost of inventory transferred out, not total cost of inventory, we only need the sum of the costs for the inventory transferred out:
$248,000 + $224,400 = $472,400
So the best choice is C, $297,600.

Cheese Heads Cheddar Utilizes a Process Costing System