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17 January, 11:38

Evans Products uses a process costing system with two processing departments: the Mixing Department and the Finishing Department. In June, unit costs incurred by the Mixing Department amounted to $4.00 per unit. Unit costs transferred to the finished goods warehouse during the month amounted to $22. Work-in-process inventories are reduced to zero each month.

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  1. 17 January, 14:36
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    A debit to Work-in-Process Inventory, Finishing Department of $140,000.

    Explanation:

    First, completion of the question is as follows:

    The transfer of 35,000 units to the Finished Department in June Required:

    Solution:

    Process Costing

    Process costing represents a method of costing in accounting such that the manufacturing costs are collected and then assigned to the units produced and it is usually adopted when the units of a goods mass produced are almost identical.

    How to assign the Total cost of Units Transferred from the Mixing to the Finishing Department?

    As such, the total cost of units to be produced will be assigned to the following departments. For the mixing department, the amount will be credited to its Work-in-progress Inventory (as outgoing) and for Finishing Department, it will be debited to Work-in - progress inventory).

    Finished goods account will usually be debited when there is a transfer of goods from a preceding department which in this case is the mixing department. This is because a Finishing department is usually a process department.

    Step 2: To calculate the total costs of transferring 35,000 units, the formula to use is as follows:

    The cost of transfer per unit x the total number of units to be transferred

    = $4 x 35,000 units = $140,000

    $140,000 will now be transferred and recorded as described above.
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