Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs.The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)

A) $253,300
B) $245,441
C) $316,098
D) $265,600

Question

Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs.The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)

A) $253,300
B) $245,441
C) $316,098
D) $265,600

Worakul Boonsomsuk · Accepted Answer

Final Answer : B, Explanation :  Step 1: Calculate the equivalent units of productionMaterials:800 units from beginning inventory + 7,700 units started = 8,500 units8,500 units x 80% = 6,800 equivalent unitsConversion:800 units from beginning inventory + 7,700 units started = 8,500 units8,500 units x 60% = 5,100 equivalent unitsStep 2: Calculate the cost per equivalent unitMaterials:Beginning inventory cost + current period cost = Total cost($15,800 + $105,800) = $121,600$121,600 / 8,500 equivalent units = $14.29 per equivalent unitConversion:Beginning inventory cost + current period cost = Total cost($13,200 + $71,400) = $84,600$84,600 / 8,500 equivalent units = $9.96 per equivalent unitStep 3: Calculate the cost of units transferred outMaterials:6,600 units transferred x $14.29 per equivalent unit = $94,494Conversion:6,600 units transferred x $9.96 per equivalent unit = $65,947Step 4: Calculate the cost of ending inventoryMaterials:1,900 units x 70% complete x $14.29 per equivalent unit = $18,081Conversion:1,900 units x 10% complete x $9.96 per equivalent unit = $1,898Step 5: Total cost transferred out and ending inventoryMaterials:$94,494 + $18,081 = $112,575Conversion:$65,947 + $1,898 = $67,845Therefore, the total cost transferred from the first processing department to the next processing department during the month is $112,575 + $67,845 = $180,420 which is not listed among the answer choices. However, the closest answer choice is B, $245,441.

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