Lakes Co utilizes a process costing system The beginning wor

Lakes Co utilizes a process costing system. The beginning work in process inventory consisted of 16,000 units. The ending work in process inventory consisted of 12,000 units which were 100% complete with respect to materials and 50% complete with respect to conversion costs.

The total cost in beginning inventory was $65,000 broken down of $30,000DM and $35,000 Conversion Costs. An additional $324,000 of costs were added during the period, with $194,400 consisting of DM costs and $129,600 of Conversion Costs.

During the month 62,000 units were transferred out to the next department.

1. How many units were started during the period?

2. Compute the Cost per E.U. for Direct Materials and Conversion.

3. How much is the total cost of the inventory transferred out during the period?

4. How much is the total cost of ending inventory.

Solution

1) Units started = 62000+12000-16000 = 58000 Units

2) Equivalent unit of material = 62000+12000 = 74000 Units

Cost per equivalent unit of material = (30000+194400)/74000 = 3.03

Equivalent unit of conversion = 62000+(12000*50%) = 68000 Unit

Cost per equivalent unit of conversion = (35000+129600)/68000 = 2.42

3) Cost of inventory transferred out = (3.03+2.42)*62000 = $337900

4) Cost of ending inventory = (12000*3.03+6000*2.42) = $50880