Question

Jeffery Ltd uses a process costing system. Its Spackling Department had no beginning Work in Process inventory. The department added direct materials of $200,000 and conversion costs of $321,300 during the period. Materials are added at the beginning of the process and conversion costs are added evenly throughout the process. During the period 75,000 units were completed, and at the end of the period, 5,000 units remained which were 30% complete. How much is transferred to the Finished Goods inventory account during the period?

		$521,300
		$488,719
		$502,500
		$556,053

Answer 1

Jeffery Ltd,

Value of finished goods transferred to inventory account :

= Value of raw materials + Value of conversation cost - Ending work in process inventory

= $ 200,000 + $ 321,300 - {(5000 units × cost of raw materials per unit)+(equivalents units × cost of conversion per unit)}

= $ 521,300 - {(5000 × (200,000/80,000)) + (5,000×0.30) × (321,300/(75,000+5,000×0.30))}

= $ 521,300 - {(5,000×2.5) + (1,500×4.2)}

= $ 521,300 - (12,500+ 6,300)

= $ 521,300 - $ 18,800

= $ 502,500

Hence, 3rd option is correct.