In the month of June, a department had 12,000 units in beginning work in process that were 70% complete. During June, 48,000 units were transferred into production from another department. At the end of June there were 6,000 units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. How many units were transferred out of the process in June?
A) 48,000 units.
B) 42,000 units.
C) 54,000 units.
D) 60,000 units.

Question

Quizplus · Accepted Answer

First, we need to calculate the equivalent units of production for both materials and conversion costs:

Materials:
Beginning WIP: 12,000 units x 70% = 8,400 equivalent units
Units started in June: 48,000 units
Ending WIP: 6,000 units x 40% = 2,400 equivalent units
Total equivalent units for materials = 8,400 + 48,000 + 2,400 = 58,800

Conversion costs:
Beginning WIP: 12,000 units x 70% = 8,400 equivalent units
Units started in June: 48,000 units
Ending WIP: 6,000 units x 40% = 2,400 equivalent units
Total equivalent units for conversion costs = 8,400 + 48,000 + 2,400 = 58,800

Next, we can calculate the total cost of the units accounted for:

Beginning WIP:
Materials cost = 8,400 equivalent units x 100% complete x $X cost per unit = $Y
Conversion costs = 8,400 equivalent units x 40% complete x $Z cost per unit = $A
Total cost for beginning WIP = $Y + $A

Units started in June:
Materials cost = 48,000 units x $X cost per unit = $B
Conversion costs = 48,000 units x $Z cost per unit = $C
Total cost for units started in June = $B + $C

Ending WIP:
Materials cost = 2,400 equivalent units x 60% incomplete x $X cost per unit = $D
Conversion costs = 2,400 equivalent units x 60% incomplete x $Z cost per unit = $E
Total cost for ending WIP = $D + $E

Total cost of units accounted for = $Y + $A + $B + $C + $D + $E

Finally, we can use the total cost of units accounted for to calculate the cost per equivalent unit:

Total cost of units accounted for / Total equivalent units = Cost per equivalent unit

We can then use the cost per equivalent unit to calculate the cost of the units transferred out:

Cost per equivalent unit x Equivalent units of production for units transferred out = Cost of units transferred out

To find the number of units transferred out, we can divide the cost of units transferred out by the cost per unit.

This calculation can be quite complex and involve many unknown variables, so the easiest way to approach the problem is to realize that the only difference between the units started in June and the units accounted for is the ending WIP. Therefore, 48,000 units - 6,000 units = 42,000 units were transferred out of the process in June. The answer is (B).

In the Month of June, a Department Had 12,000 Units