ECONOMICS

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COST ACCOUNTING

PROCESS COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Materials costs of RM600, 000 and conversion costs of RM642, 600 were charged to a processing department in the month of September. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. There were no units in beginning work in process, 100, 000 units were started into production in September, and there were 8, 000 units in ending work in process that were 40% complete at the end of September. What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September?
A
RM552, 000.
B
RM1, 173, 000.
C
RM1, 242, 600.
D
RM1, 275, 600.
Explanation: 

Detailed explanation-1: -Conversion costs include direct labor and overhead expenses incurred as a result of the transformation of raw materials into finished products.

Detailed explanation-2: -Materials added at the beginning means 100% complete since it has received all its materials. Materials or conversion costs added evenly means use the percent complete given. Remember, conversion costs means direct labor and overhead.

Detailed explanation-3: -The total conversion cost formula is: Conversion Costs = Direct Labor Costs + Manufacturing Overheads.

Detailed explanation-4: -To simply calculate equivalent units, you can multiply the number of physical items by the percentage of the work done on them. For two items that are 50% done, you would have one equivalent unit (2 x 50% = 1). When the items are completely finished, the number of equivalent units is equal to the physical items.

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