Question

Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February: Molding Assembly Beginning inventories: Physical units 10,000 8,000 Costs: Transferred in $45,400 Direct materials $22,000 Conversion costs $13,800 $16,700 Current production: Units started 25,000 ? Units transferred out 30,000 35,000 Costs: Transferred in Direct materials $56,750 $39,550 Conversion costs $106,500 $143,000 Percentage of completion: Beginning inventory 40% 50% Ending inventory 80 50

Answer 1

S.No.	Particulars	Dr/Cr	Amount	Amount
1	Work in Progress A/c	Dr	56,750
	To Direct Material A/c			56,750
	(Being Materials added at the beginning of process in Molding Dept)
2	Work in Progress A/c	Dr	106,500
	To Conversion Cost A/c			106,500
	(Being conversion cost recorded in Molding Dept)
3	Assembly Dept	Dr	177,283
	To Work in Progress A/c			177,283
	(Being Material Transferred to assembly Dept)

Working Note for calculation of cost of production for material transferred:

Opening inventories 10000 units with 40% completion

i.e. 60% balance work completed during this year on 10000 units

Total 30000 units transferred to assembly dept

out of which 10000 partially completed units were completed and 20000 fresh units completed.

Closing invetories 5000 (10000+25000-30000) units with 80% completion.

units	Completed during the period	Net production
10000	60%	6000
20000	100%	20000
5000	80%	4000
	units worked during this period	30000

Per Unit material cost 56750/30000 = 1.89

Per Unit Conversion cost 106500/30000 = 3.55

Therefore closing inventory cost is (4000*1.89)+(4000*3.55) = 21767

and transfer cost is Opening+cost during period-closing

For Material 22000+56750-7567 = 71183

For Conversion 13800+106500-14200 = 106100

Total 71183+106100 = 177283

Calculation of unit cost :

total cost of 30000 transferred units 177283

per unit cost    5.91