Penny, inc. employs a process costing system. direct materials are added at the beginning of the process. here is information about the july activities:
on july 1:
beginning inventories 850 units, 60% complete
direct materials cost $5,000
conversion costs $4,000
during july:
number of units started 15,000
direct materials added $155,000
conversion costs added $83,520
on july 31:
ending inventories 1,600 units, 40% complete
using the fifo method and rounding cost per unit to the nearest whole dollar, the cost of goods completed and transferred out during july was
a. $227,270
b. $236,905
c. $228,200
d. $223,400

d. $223,400

Explanation:

beginning WIP 850 units  60%

units started 15,000 units

ending WP     1,600 units at 40%

finished units: 850 + 15,000 - 1,600 = 14,250

started and completed during the period:

14,250 - 850 = 13,400

Direct materials:

Equivalent units: 15,000

Cost per equivalent unit: 155,000 / 15,000 = 10.33

Transferred outs:

850 units                          $    5,000

13,400 at $ 10 each =       $ 134,000

Total                                   $ 139,000

Conversion Cost:

Equivalent units:

13,400 + 1,600 x 40% + 850 x 40% = 14,380

Cost per equivalent unit: 83,520 / 14,380 = 5.8080 = 5.81

Cost per equivalent unti: 5.81 + 10.33 = 16.14 = 16

Transferred-out:

beginning        $     9,000

13,400 x $16    $  214,400

                            223,400

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