Chapter 4, Problem 1AE

To determine

Total cost of units transferred out.

Unit of goods completed in the production process and transferred to other department during in the period, cost incurred to this completed goods which includes material and conversions jointly is known as total cost of units transferred out.

Total cost of the units transferred out and its cost is changed or not.

Answer to Problem 1AE

Solution:

Costs per equivalent unit	Materials	Conversion
Cost of beginning work in process inventory	9600	5575
Cost added during the period	368600	350900
Total Cost	378200	356475
Equivalent unit of production	2480	2450
Cost per equivalent unit	152.50	145.50

Total cost of the units transferred out is $715,200.

Yes, total cost of the units transferred out was changed because current equivalent unit of production was decreased at the same time cost per equivalent unit has increased.

Explanation of Solution

Explanations:

Formulas used:

  $Totalcost=Costofbeginningworkinprocessinventory+costaddedduringtheperiod$

  $\begin{array}{l}Equivalentunitofproduction=Unitscompleteandtransferredduringintheperiod\hfill \\ +endingworkinginprocesscompletionpercentage.\hfill \end{array}$

  $Costperequivalentunit=Totalcost/Equivalentunitofproduction.$

  $\begin{array}{l}Unitscompleteandtransferredduringintheperiod=Totalunits-ending\hfill \\ workinprocessendinginventory.\hfill \\ \hfill \end{array}$

  $\begin{array}{l}Totalcostoftheunitstransferredout=Productionunitscompletedduringintheperiod*\hfill \\ totalcostperequivalentunit.\hfill \\ \hfill \end{array}$

Calculations:

Total cost for material= $9600 + $368600=$378,200

Total cost for conversion= $5575+$350900=$356475

Equivalent unit of production for materials = 2400 units +80 units (200 units *40/100=80) =2480units

Equivalent unit of production for conversion = 2400 units +50 units (200 units * 25/100=50) =2450 units.

Cost per equivalent unit for material = $378,200 / 2480units = $152.50

Cost per equivalent unit for conversion=$356475 / 2450 units = $145.50

Units complete and transferred during in the period = 2500 units -100 units=2400

Total cost of the units transferred out = 2400 * $298 ($152.50+$145.50=$298) =$715,200.

Conclusion

Above calculation derived given cost per equivalent unit for materials as well as conversion also derived total cost of the units transferred and above explanation stated total cost of the units transferred out was changed.