Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs.The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)
A) $253,300
B) $245,441
C) $316,098
D) $265,600

Question

Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:  A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
 The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs.The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)
A) $253,300 
B) $245,441 
C) $316,098 
D) $265,600

Quizplus · Accepted Answer

Step 1: Calculate the equivalent units of production

Materials:
800 units from beginning inventory + 7,700 units started = 8,500 units
8,500 units x 80% = 6,800 equivalent units

Conversion:
800 units from beginning inventory + 7,700 units started = 8,500 units
8,500 units x 60% = 5,100 equivalent units

Step 2: Calculate the cost per equivalent unit

Materials:
Beginning inventory cost + current period cost = Total cost
($15,800 + $105,800) = $121,600
$121,600 / 8,500 equivalent units = $14.29 per equivalent unit

Conversion:
Beginning inventory cost + current period cost = Total cost
($13,200 + $71,400) = $84,600
$84,600 / 8,500 equivalent units = $9.96 per equivalent unit

Step 3: Calculate the cost of units transferred out

Materials:
6,600 units transferred x $14.29 per equivalent unit = $94,494

Conversion:
6,600 units transferred x $9.96 per equivalent unit = $65,947

Step 4: Calculate the cost of ending inventory

Materials:
1,900 units x 70% complete x $14.29 per equivalent unit = $18,081

Conversion:
1,900 units x 10% complete x $9.96 per equivalent unit = $1,898

Step 5: Total cost transferred out and ending inventory

Materials:
$94,494 + $18,081 = $112,575

Conversion:
$65,947 + $1,898 = $67,845

Therefore, the total cost transferred from the first processing department to the next processing department during the month is $112,575 + $67,845 = $180,420 which is not listed among the answer choices. However, the closest answer choice is B, $245,441.

Esty Corporation Uses the Weighted-Average Method in Its Process Costing