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

Exercise 30

Process Costing

Oholics, Ltd., produces chocolate that it sells to candy makers. On April 1, it had no work-in-process inventory. It started production of 20,000 pounds of chocolate in April and completed production of 19,000 pounds. The costs of the resources used by Oholics in April consist of the following:

Materials	$33,000
Conversion costs (labor and overhead)	40,500

Required

The production supervisor estimates that the ending work in process is 60 percent complete on April 30. Compute the cost of chocolate completed and the cost of the chocolate in work-in-process ending inventory as of April 30.

Step 1 of 3

Compute the cost chocolate completed:

In order to compute the cost of goods sold for March total cost should be computed first as follows.

Details	Amount
Material	$ 33,000
Conversion cost (Labor and Overhead)	$ 40,500
Total cost	$ 73,500

Total transferred out pounds are 19,000 and uncompleted pounds are 400 (1,000 × 40%) making total computed pounds to 19,400. In detail, $73,500 incurred to produce 19,400 pounds. Therefore, cost per pound is equal to $3.7887 ($73,500/19,400).