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Passera Inc
Passera Inc. manufactures a single product in a continuous processing environment. All materials are added at the beginning of the process, and conversion costs are applied evenly throughout the process. To assign costs to inventories, the company uses a weighted-average process costing.
The following information was available for 2016:
| Sales (selling price per unit, $40) | $4,080,000 |
| Actual manufacturing overhead | 660,000 |
| Selling and administrative expenses | 328,000 |
| Unit costs of production: | |
| Direct materials (1 kilogram) | 6 |
| Direct labor (1/2 hour) | 8 |
| Overhead | 9 |
| Total | 23 |
| Units transferred to finished goods | 140,000 |
| Materials purchased | 125,000 |
| Materials used in process | 136,000 |
An inventory count at year-end (December 31, 2016) revealed that the inventories had the following balances:
| Raw materials | 8,000 kilograms |
| Work in process (45% complete) | 22,000 units |
| Finished goods | 45,000 units |
January 1, 2016, work in process units is 70% complete. The unit cost of production was the same in 2016 as it was in 2015.
The opening (January 1, 2016) balance in units and costs of (1) raw materials, (2) work in process, and (3) finished goods.
Expert Solution
1.
Opening balance of raw material (Units) = Material used in process + Ending inventory - Purchase during the year
Opening balance of raw material (Units) = 136,000 + 8,000 - 125,000
Opening balance of raw material (Units) = 19,000 units
Opening balance of raw material (Cost) = Opening balance of raw material (Units) * Units production cost (direct materials)
Opening balance of raw material (Cost) = 19,000 * 6
Opening balance of raw material (Cost) = $114,000
2.
Opening balance of work in process (Units) = Units transferred to finished goods + Ending finished goods - Units added during year
Opening balance of work in process (Units) = 140,000 + 22,000 - 136,000
Opening balance of work in process (Units) = $26,000
Opening balance of work in process (Cost) = (Beginning balance of work in process (Units) * Units production cost (Total cost)) * Complete work in process
Opening balance of work in process (Cost) = (26,000 * 23) * 70%
Opening balance of work in process (Cost) = 598,000 * 0.70
Opening balance of work in process (Cost) = $418,600
3.
[Math Processing Error]Total units sold = SalesSelling price per unitTotal units sold = 4,080,00040Total units sold = 102,000
Opening balance of finished goods (Units) = Net units sold + Ending finished goods - Net production during year
Opening balance of finished goods (Units) = 102,000 + 45,000 - 140,000
Opening balance of finished goods (Units) = $7,000
Opening balance of finished goods (Cost) = Opening balance of finished goods (Units) * Units production cost (Total cost)
Opening balance of finished goods (Cost) = 7,000 * 23
Opening balance of finished goods (Cost) = $161,000
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