Haffner Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:
Beginning work in process inventory:
500
Units in beginning work in process inventory
$7,800
Materials costs .
$9,100
Conversion costs
85%
Percentage complete with respect to materials
55%
Percentage complete with respect to conversion
7,000
Units started into production during the month
6,100
Units transferred to the next department during the month
$102,700
Materials costs added during the month .
$184,400
Conversion costs added during the month .
500
Ending work in process inventory:
Units in ending work in process inventory
1,400
Percentage complete with respect to materials
60%
Percentage complete with respect to conversion
50%
The total cost transferred from the first processing department to the next processing department during the month is closest to:
A) $304,000
B) $332,835
C) $270,706
D) $287,100
The Correct Answer and Explanation is :
To determine the total cost transferred from the first processing department to the next department, we must calculate the total costs of the units transferred out during the period using the weighted-average method. This method combines the costs from the previous period’s beginning inventory with the costs incurred during the current period to allocate the total costs to the units completed and transferred.
Step-by-step solution:
- Units Transferred Out:
- We are given that 6,100 units were started and that the units transferred out during the period were 6,100.
- The total number of units to account for in the first processing department is: Units to account for=Units in beginning work in process+Units started into production\text{Units to account for} = \text{Units in beginning work in process} + \text{Units started into production} Units to account for=500+7,000=7,500 units\text{Units to account for} = 500 + 7,000 = 7,500 \, \text{units}
- Cost of Units Transferred Out: To calculate the cost of units transferred out, we must first determine the cost per unit for both materials and conversion costs. This is done by dividing the total costs (both beginning inventory and costs added during the month) by the total number of equivalent units for both materials and conversion costs. Materials Costs: Total materials costs=Beginning materials costs+Materials costs added during the month\text{Total materials costs} = \text{Beginning materials costs} + \text{Materials costs added during the month} Total materials costs=7,800+102,700=110,500 USD\text{Total materials costs} = 7,800 + 102,700 = 110,500 \, \text{USD} The equivalent units for materials are calculated as: Equivalent units for materials=Units transferred out+Ending WIP×Percentage complete for materials\text{Equivalent units for materials} = \text{Units transferred out} + \text{Ending WIP} \times \text{Percentage complete for materials} Equivalent units for materials=6,100+1,400×60%=6,100+840=6,940 units\text{Equivalent units for materials} = 6,100 + 1,400 \times 60\% = 6,100 + 840 = 6,940 \, \text{units} Therefore, the cost per equivalent unit for materials is: Materials cost per unit=110,5006,940=15.92 USD per unit\text{Materials cost per unit} = \frac{110,500}{6,940} = 15.92 \, \text{USD per unit} Conversion Costs: Total conversion costs=Beginning conversion costs+Conversion costs added during the month\text{Total conversion costs} = \text{Beginning conversion costs} + \text{Conversion costs added during the month} Total conversion costs=9,100+184,400=193,500 USD\text{Total conversion costs} = 9,100 + 184,400 = 193,500 \, \text{USD} The equivalent units for conversion are: Equivalent units for conversion=Units transferred out+Ending WIP×Percentage complete for conversion\text{Equivalent units for conversion} = \text{Units transferred out} + \text{Ending WIP} \times \text{Percentage complete for conversion} Equivalent units for conversion=6,100+1,400×50%=6,100+700=6,800 units\text{Equivalent units for conversion} = 6,100 + 1,400 \times 50\% = 6,100 + 700 = 6,800 \, \text{units} Therefore, the cost per equivalent unit for conversion is: Conversion cost per unit=193,5006,800=28.44 USD per unit\text{Conversion cost per unit} = \frac{193,500}{6,800} = 28.44 \, \text{USD per unit}
- Total Cost Transferred Out: The total cost transferred out is calculated as: Cost transferred out=(Units transferred out)×(Materials cost per unit+Conversion cost per unit)\text{Cost transferred out} = (\text{Units transferred out}) \times (\text{Materials cost per unit} + \text{Conversion cost per unit}) Cost transferred out=6,100×(15.92+28.44)=6,100×44.36=270,706 USD\text{Cost transferred out} = 6,100 \times (15.92 + 28.44) = 6,100 \times 44.36 = 270,706 \, \text{USD}
Thus, the total cost transferred from the first processing department to the next department during the month is $270,706.
Final Answer:
C) $270,706