Question

The Mercer Corporation prepared the following production cost report for Department 1 for October of the current year.

	Physical Units
Work in process inventory, October 1	0 units
Units started in production in October	7,800 units
Units transferred to finished goods inventory during October	7,000 units

Costs incurred in December:

• Direct materials                                               $24,192
• Direct labor and manufacturing overhead      $53,070

Work in process inventory on October 31 is 70% complete as to direct materials and 40% complete as to conversion costs.

The Mercer Corporation prepared the following production cost report for Department 1 for October of the current year.

	Physical Units
Work in process inventory, October 1	0 units
Units started in production in October	7,800 units
Units transferred to finished goods inventory during October	7,000 units

Costs incurred in December:

• Direct materials                                               $24,192
• Direct labor and manufacturing overhead      $53,070

Work in process inventory on October 31 is 70% complete as to direct materials and 40% complete as to conversion costs.

Answer 1

Particulars	Calcuation	Units
Finished Goods Produced (100%)		7000
Equivalent Finished Goods in Work in Progress:
Direct materials used (70%)	(800*0.70)	560
Conversion Costs incurred (40%)	(800*0.40)	32
Particulars	Calcuation	Amount
Cost per equivalent Finished Good:
Direct materials	$24,192/(7,000+560)	$            3.20
Conversion Costs incurred	$53,070/(7,000+320)	$            7.25
Total Cost of Finished goods	7,000*($3.20+$7.25)	$ 73,150.00
Total Cost of Work in Progress	(560*$3.20)+(320*$7.25)	$    4,112.00