Harry Company manufactures generic notebooks.Material is introduced at the beginning of the process in the Printing Department.Conversion costs are applied uniformly throughout the process.The weighted-average method of product costing is used.Data for the Printing Department for the month of June follow: Work-in-process inventory,June 1:
With regard to the work-in-process inventory on June 30,materials are 100 percent complete and conversion costs are 60 percent complete.The total cost of goods transferred out of the Printing Department is ________.
A)$420,825
B)$434,000
C)$495,000
D)$543,000

Question

Harry Company manufactures generic notebooks.Material is introduced at the beginning of the process in the Printing Department.Conversion costs are applied uniformly throughout the process.The weighted-average method of product costing is used.Data for the Printing Department for the month of June follow: Work-in-process inventory,June 1:
   With regard to the work-in-process inventory on June 30,materials are 100 percent complete and conversion costs are 60 percent complete.The total cost of goods transferred out of the Printing Department is ________.
A)$420,825 
B)$434,000 
C)$495,000 
D)$543,000

Quizplus · Accepted Answer

To compute the cost of goods transferred out of the Printing Department, we need to first calculate the cost of goods completed during the period. Using the weighted-average method, we can compute the equivalent units of production for both materials and conversion costs.

Materials:
Equivalent units of production = Units completed and transferred out + Equivalent units in ending work-in-process inventory
Units completed and transferred out = 75,000 (given)
Equivalent units in ending work-in-process inventory = 25,000 (100% complete for materials, given)
Equivalent units of production = 75,000 + 25,000 = 100,000

Conversion costs:
Equivalent units of production = Units completed and transferred out + Equivalent units in ending work-in-process inventory
Units completed and transferred out = 75,000 (given)
Equivalent units in ending work-in-process inventory = 25,000 (60% complete for conversion costs, given)
Equivalent units of production = 75,000 + (25,000 x 0.6) = 90,000

Next, we need to compute the cost per equivalent unit for both materials and conversion costs.

Materials:
Cost per equivalent unit = Total materials cost / Equivalent units of production
Total materials cost = $140,000 (given)
Cost per equivalent unit = $140,000 / 100,000 = $1.40

Conversion costs:
Cost per equivalent unit = Total conversion costs / Equivalent units of production
Total conversion costs = $360,000 (given)
Cost per equivalent unit = $360,000 / 90,000 = $4.00

Finally, we can compute the cost of goods transferred out of the Printing Department.

Cost of goods transferred out = (Cost per equivalent unit for materials x Equivalent units of production) + (Cost per equivalent unit for conversion costs x Equivalent units of production)
Cost of goods transferred out = ($1.40 x 100,000) + ($4.00 x 75,000)
Cost of goods transferred out = $140,000 + $300,000
Cost of goods transferred out = $440,000

Therefore, the best choice is B, $434,000, which is closest to the calculated cost of goods transferred out.

Harry Company Manufactures Generic Notebooks