Chapter 20, Problem 16QS

To determine

Concept Introduction:

Costs assigned to Units transferred and units in ending inventory:

The costs are assigned to units transferred and units in ending inventory on the basis of equivalent units in materials and conversion and cost per units assigned.
The costs assigned to units transferred are calculated as under −
  $\begin{array}{l}Costsassignedtounitstransferred=EquivalentunitsofmaterialsXCostperequivalentunits\hfill \\ +EquivalentunitsofconversionXCostperequivalentunits\hfill \end{array}$

The costs assigned to ending inventory are calculated as under −
  $\begin{array}{l}Costsassignedto\text{ ending inventory }=EquivalentunitsofmaterialsXCostperequivalentunits\hfill \\ +EquivalentunitsofconversionXCostperequivalentunits\hfill \end{array}$

To assign:

Costs to the assembly department's output for −

1. Units transferred out to painting department
2. Units in ending inventory (units that remain n process in the assembly department at month-end)

Answer to Problem 16QS

Solution:

Costs assigned for −

Units transferred out to painting department = $ 16,590

Units in ending inventory = $ 3,663

Explanation of Solution

The costs assigned to units transferred out to painting department and to units in ending inventory are calculated as under −

Costs assigned to units transferred out to painting department −

Given,

Equivalent units for units transferred for materials = 7,000 units

Equivalent units for units transferred for conversion = 7,000 units

Cost per equivalent unit for materials = $ 1.02 per unit

Cost per equivalent unit for conversion = $ 1.35 per unit

  $\begin{array}{l}Costsassignedto\text{ units transferred }=EquivalentunitsofmaterialsXCostperequivalentunits\hfill \\ \begin{array}{l}+EquivalentunitsofconversionXCostperequivalentunits\\ Costsassignedto\text{ units transferred }=(7,000unitsX\$1.02perunit)+(7,000unitsX\$1.35perunit)\\ Costsassignedto\text{ units transferred }=\$16,590\end{array}\hfill \end{array}$

The costs assigned to units transferred out to painting department are = $ 16,590

1. Costs assigned to units that remain in assembly department (Ending inventory units) −

Given,

2. Equivalent units for ending inventory for materials = 2,400 units
3. Equivalent units for ending inventory for conversion = 900 units
4. Cost per equivalent unit for materials = $ 1.02 per unit
5. Cost per equivalent unit for conversion = $ 1.35 per unit

  $\begin{array}{l}Costsassignedto\text{ ending inventory }=EquivalentunitsofmaterialsXCostperequivalentunits\hfill \\ \begin{array}{l}+EquivalentunitsofconversionXCostperequivalentunits\\ Costsassignedto\text{ ending inventory }=(2,400unitsX\$1.02perunit)+(900unitsX\$1.35perunit)\\ Costsassignedto\text{ ending inventory }=\$3,663\end{array}\hfill \end{array}$

The costs assigned to units that remain in assembly department (Ending inventory units) are = $ 3,663.

Conclusion

Thus, the costs to the assembly department's output for units transferred out to painting department and units in ending inventory (units that remain n process in the assembly department at month-end) have been assigned.