ECONOMICS

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COST ACCOUNTING

PROCESS COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
In the month of June, a department had 20, 000 units in beginning work in process that were 70% complete. During June, 90, 000 units were transferred into production from another department. At the end of June there were 10, 000 units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. How many units were transferred out of the process in June?
A
90, 000 units.
B
80, 000 units.
C
100, 000 units.
D
110, 000 units.
Explanation: 

Detailed explanation-1: -If the units in the beginning Work-in-Process Inventory are greater than the units in the ending Work-in-Process Inventory, then the units transferred out are: more than the units started during the period.

Detailed explanation-2: -Charley Company’s Assembly Department has materials cost at $2 per unit and conversion cost at $4 per unit. There are 20, 000 units in ending work in process, all of which are 70% complete as to conversion costs and 100% complete as to materials.

Detailed explanation-3: -The equivalent units of production is the sum of units completed and transferred out and the equivalent units of ending work in process inventory (5, 000 units X 60%) or 20, 000 + 3, 000 = 23, 000 units. Equivalent units of production measure the amount of work that should be completed during a period.

Detailed explanation-4: -An equivalent unit of conversion costs is equal to the amount of conversion costs required to: start and complete a unit. In the computation of the manufacturing cost per equivalent unit, the weighted-average method of process costing considers: current costs plus cost of beginning Work-in-Process Inventory.

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