Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 28

Process Costing

Van Goe produces paints. On January 1, it had no work-in-process inventory. It starts production of 300,000 gallons of paint in January and completes 240,000 gallons. The costs of the resources used by Van Goe in January consist of the following:

Materials	$328,800
Conversion costs (labor and overhead)	420,000

Required

The production supervisor estimates that the ending work in process is 80 percent complete. Compute the cost of paint transferred to finished goods and the amount in work-in-process ending inventory as of January 31.

Step 1 of 2

Process Costing

The process costing is used where it is not possible to differentiate the cost associated with the individual units output and there is huge production of similar products. The costs of a given period are accumulated and then allocated to the products produced in that period. The same cost is allocated to each product produced.