Question

Unit Cost, Valuing Goods Transferred Out and EWIP

During April, the grinding department of Tranx Inc. completed and transferred out 312,000 units. At the end of April, there were 156,000 units in process, 60% complete. Tranx incurred manufacturing costs totaling $1,622,400.

Required:

1. Calculate the unit cost.   $ _______________per unit

2. Calculate the cost of goods transferred out and the cost of ending WIP.

Cost of goods transferred out	$
Cost of ending WIP	$

Answer 1

Q1- The unit cost is $5.77

Step 1:- Calculate Equivalent units:

Equivalent units = unit completed + WIP × percentage complete

Equivalent unit = $312000 + $156000 × 60%

=$468000 × 60%

=$280800

Step 2:- Apply formula of unit cost:

Unit cost = Total cost / Equivalent units

=$1622400 / $280800

=$ 5.77

:. The unit cost is $5.77

Q2- Cost of goods transferred:-

Cost of goods transferred = Unit cost × Unit completed

= $5.77 × $312000 units

= $1800240.

Cost of ending WIP:

Cost of WIP = unit cost × Units of WIP

= $5.77 × $93600(156000×60%)

=$540072

Hence the cost of ending WIP is $540072