[The following information applies to the questions displayed below.] Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 22,200 units of product to finished goods inventory. Its 3,000 units of beginning work in process consisted of $19,800 of direct materials and $221,940 of conversion costs. It has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $496,800 of direct material costs and $2,165,940 of conversion costs were charged to production. 2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.

Finished Goods $2,664,000 (debit)

Work In Process $2,664,000 (credit)

Explanation:

The First step is to determine the Equivalent units of Production

Direct Materials

Units Completed and Transferred             22,200

Units of Ending Work In Process                 2,400

Total                                                             24,600

Conversion Costs

Units Completed and Transferred                 22,200

Units of Ending Work In Process at 80%         1,920

Total                                                                 24,120

The Next step is to determine the Total Cost incurred during the period in respect to Direct Materials and Conversion.

Direct Materials

Cost in Opening Work In Process              $19,800

Add during the Period                              $496,800

Total                                                            $516,600

Conversion Costs

Cost in Opening Work In Process             $221,940

Add during the Period                            $2,165,940

Total                                                         $2,387,880

Then determine the Total Equivalent Unit Cost of Production.

Equivalent Unit Cost = Total Cost / Total Equivalent Units.

Direct Materials ( $516,600 / 24,600)     = $21.00

Conversion Cost ( $2,387,880 / 24,120) = $99.00

Total Equivalent Unit Cost                       = $120.00

Finally determine the Cost of units Completed and Transferred.

Cost of units Completed and Transferred = Number of units × Total Equivalent Unit Cost    

                                                                     = 22,200 × $120.00

                                                                     = $2,664,000

Journal Entry to transfer the cost of completed units to finished goods inventory.

Finished Goods $2,664,000 (debit)

Work In Process $2,664,000 (credit)

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