MA23 Problem: Process Costing – Transferred In, No Spoilage – MCI

MA23 Problem: Process Costing – Transferred In, No Spoilage – MCI

This is a straight forward problem which provides an overview of process costing, includingtransferred in costs. There are not any complicating factors such as spoilage.ABC Manufacturing Incorporated (“MCI”) uses a process costing system in each of its twodepartments. Once units have been processed in Department A, they are transferred toDepartment B for further processing. Material is applied at the beginning of the process inDepartment A and at 95% completion in Department B. Labour and overhead costs occur evenlythroughout production in both Department A and B.In the current period beginning WIP in Department A was 200 units (65% completed). Thisinventory incurred direct material costs of $2000 and conversion costs of $6240. The beginningWIP in Department B was 400 units ( 90% complete). Department B’s beginning WIP cost$24800 for transfer in cost and $6000 in conversion.During the current period, in Department A 10000 units were started, 8000 units were transferredout of Department A to Department B, and ending WIP in Department A was 2200 units (75%complete). In Department B 8000 units were transferred in, 7000 units were transferred tofinished goods, and ending WIP inventory was 1400 units (1000 units 75% completed and 400units 95% completed).Costs incurred in each of the departments during the current period are:Department ADepartment BMaterial $120,400 $ 14,800Labour and Overhead $476,000 $127,950

Required

1. Using first in first out (FIFO) costing methodology calculate for both Department A and Bthe:

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Cost of goods transferred

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Cost of ending WIP

Round the cost per equivalent unit to four decimal places and round all other costcalculations to the nearest dollar.2. Re-calculate part 1 using the weighted average costing methodology.

Round the cost per equivalent unit to four decimal places and round all other costcalculations to the nearest dollar.