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25 January, 11:13

LO 5.3Direct material costs $3 per unit, direct labor costs $5 per unit, and overhead is applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred to the next department if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory?

$1,000

$13,000

$130,000

$20,000

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Answers (1)
  1. 25 January, 13:03
    0
    value of inventory transferred = $130,000

    so correct option is C. $130,000

    Explanation:

    given data

    material costs = $3 per unit

    direct labor costs = $5 per unit

    overhead rate = 100% of direct labor cost

    beginning inventory = 2000 units

    started = 9000 units

    ending inventory = 1000 units

    to find out

    value of the inventory transferred to the next department

    solution

    first we get here Overhead applied that is express as

    Overhead applied = direct labor cost * 100% ... 1

    put here value

    Overhead applied = 5 * 100%

    Overhead applied = $5

    and cost per unit will be

    Cost per unit = Direct material costs + direct labor costs + Overhead ... 2

    put here value we get

    Cost per unit = $3 + $5 + $5

    Cost per unit = $13

    now we get here inventory transferred to next department will be as

    inventory transferred = beginning inventory + started - ending inventory ... 3

    inventory transferred = 2,000 + 9,000 - 1,000

    inventory transferred = 10,000 units

    so value of the inventory transferred will be as

    value of inventory transferred = inventory transferred * Cost per unit ... 4

    put here value we get

    value of inventory transferred = 10000 * $13

    value of inventory transferred = $130,000

    so correct option is C. $130,000
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