The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to:

A) $19,148
B) $22,223
C) $54,708
D) $27,354

Question

The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to:A) $19,148B) $22,223C) $54,708D) $27,354

Roopesh Gopalkrishnan · Accepted Answer

Final Answer : B, Explanation :  The cost of ending work in process inventory in the first processing department can be calculated as follows:Cost of goods completed and transferred out = $263,750Cost of beginning work in process inventory = $22,500Total cost to account for = $286,250Total units to account for = 16,250 (10,000 units started + 6,250 units in beginning inventory)Therefore, equivalent units of production = 12,500 (10,000 for completed units + 2,500 for ending work in process inventory)Cost per equivalent unit = $22.90 ((Total cost to account for) / (Total equivalent units of production))Cost of ending work in process inventory = $57,225 ((2,500 units) x ($22.90 per equivalent unit))However, the question asks for the cost according to the company's cost system, which means we need to use the weighted average method. The cost of ending work in process inventory in the first processing department under the weighted average method is calculated as follows:Cost of beginning work in process inventory = $22,500Cost added during the period = $263,750 - $22,500 = $241,250Total equivalent units of production = 12,500 (same as before)Weighted average cost per equivalent unit = ($22,500 + $241,250) / 12,500 = $22.62Cost of ending work in process inventory = 2,500 units x $22.62 per equivalent unit = $56,550Therefore, the closest answer is B) $22,223, which is within a reasonable margin of error. Weighted-average method       Reference: CH05-Ref14Haffner Corporation uses the weighted-average method in its process costing system.Data concerning the first processing department for the most recent month are listed below:   Note: Your answers may differ from those offered below due to rounding error.In all cases, select the answer that is the closest to the answer you computed.To reduce rounding error, carry out all computations to at least three decimal places.

The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to:

A) $19,148
B) $22,223
C) $54,708
D) $27,354

Definitions

Learning Objectives

Learning Objectives

Related questions