Kirkpatrick Company uses a process-cost system with the FIFO method of accounting for beginning inventories. Materials are added at the beginning of the process, and conversion costs are incurred uniformly. Work-in-process at the beginning is assumed to be 40 percent complete and at the end to be 70 percent complete. Additional data follow:

-The total cost of the units completed and transferred is
A) $295,920.
B) $306,840.
C) $289,200.
D) $298,840.

Question

Kirkpatrick Company uses a process-cost system with the FIFO method of accounting for beginning inventories. Materials are added at the beginning of the process, and conversion costs are incurred uniformly. Work-in-process at the beginning is assumed to be 40 percent complete and at the end to be 70 percent complete. Additional data follow:
 
-The total cost of the units completed and transferred is
A) $295,920. 
B) $306,840. 
C) $289,200. 
D) $298,840.

Quizplus · Accepted Answer

Using the FIFO method, we need to first calculate the equivalent units of production for both materials and conversion costs:

Materials:
A) Units completed and transferred = 34,000
B) Ending work-in-process units = 12,000 x 70% = 8,400 equivalent units
C) Total equivalent units = 34,000 + 8,400 = 42,400

Conversion costs:
A) Units completed and transferred = 34,000
B) Ending work-in-process units = 12,000 x 70% = 8,400 equivalent units
C) Beginning work-in-process units = 12,000 x 40% = 4,800 equivalent units
D) Total equivalent units = 34,000 + 8,400 + 4,800 = 47,200

Next, we can calculate the cost per equivalent unit for materials and conversion costs:

Materials:
A) Beginning inventory cost = $54,000 / 15,000 = $3.60
B) Additional cost added = $402,000 / 36,000 = $11.17
C) Total cost per equivalent unit = $3.60 + $11.17 = $14.77

Conversion costs:
A) Total cost added = $342,000 / 36,000 = $9.50
B) Total cost per equivalent unit = $9.50

Finally, we can use the cost per equivalent unit to calculate the total cost of the units completed and transferred:

A) Units completed and transferred:
- Materials cost = 34,000 x $14.77 = $501,180
- Conversion costs = 34,000 x $9.50 = $323,000
- Total cost = $501,180 + $323,000 = $824,180

Therefore, the correct answer is B) $306,840.

Kirkpatrick Company Uses a Process-Cost System with the FIFO Method