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Old Tyme Soda produces one flavor of a popular local soft drink. It had no work-in-process on October 31 in its only inventory account. During November, Old Tyme started 11,400 barrels. Work-in-process on November 30 is 1,900 barrels. The production supervisor estimates that the ending work-in-process inventory is 40 percent complete. An examination of Old Tyme’s accounting records shows direct material costs of $24,413 and conversion costs of $27,400 for November. All production is sold as it is produced. Required: a. Compute cost of goods sold for November. b. What is the value of work-in-process inventory on November 30

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Answer:

a. $‭47,975‬

b. $‭‭3,838

Explanation:

a. Cost of goods sold = Units transferred out * Cost per barrel

Cost per barrel

= (Material + Conversion costs) / Equivalent units produced

Equivalent units produced

= Units transferred = 11,400 - 1,900 = 9,500

EUP = Units transferred + Equivalent WIP

= 9,500 + (40% * 1,900)

= ‭10,260‬ units

Cost per barrel = (24,413 + 27,400 ) / 10,260

= $‭5.05‬

Cost of goods sold = 9,500 * 5.05

= $‭47,975‬

b. Value of Work in Process

= Work in process * Cost

= (40% * 1,900) * 5.05

= $‭‭3,838‬

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