Flynn and Morgan Refiners began business on July 1. The following operations dat

Question

Flynn and Morgan Refiners began business on July 1. The following operations data are available for July and the one product the company produces:

All production at Flynn and Morgan is sold as it is produced (there are no finished goods inventories).

a. Compute cost of goods sold for July.

b. What is the value of the WIP inventory on July 31?

Gallons Beginning inventory 0 Started in July        310,000 Ending WIP (80% complete)           30,000 Costs incurred in July were: Materials        250,000 Labor           52,000 Manufacturing overhead        154,000

Explanation / Answer

equivalent unit : 280000+(30000*80%) = 304000 units

Cost per equivalent unit = (250000+52000+154000)/304000 = 1.5 per equivalent unit

a) Cost of goods sold = 280000*1.50 = 420000

b) Ending work in process on july 12 = 30000*80%*1.50 = 36000

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