Work in Process Inventory Accounts in Process Costing Systems
Chemical, Inc., which uses a process costing system, makes a chemical used as a preservative. The manufacturing process involves Departments A and B. The company had the following total costs and unit costs for completed production last month, when it manufactured 10,000 pounds of the chemical. Neither Department A nor Department B had any beginning or ending work in process inventories.
| Total cost |
Unit cost |
| Department A: |
| Direct materials |
$ 9,000 |
$ 0.90 |
| Direct labor |
2,600 |
0.26 |
| Overhead |
1,300 |
0.13 |
| Total costs |
$ 12,900 |
$ 1.29 |
| Department B: |
| Direct materials |
$ 3,000 |
$ 0.30 |
| Direct labor |
700 |
0.07 |
| Overhead |
1,000 |
0.10 |
| Total costs |
$ 4,700 |
$ 0.47 |
| Totals |
$ 17,600 |
$ 1.76 |
1. How many Work in Process Inventory accounts would Chemical, Inc., use?
2. What dollar amount of the chemical's production cost was transferred from Department A to Department B last month?
3. What dollar amount was transferred from Department B to the Finished Goods Inventory account?
4. What dollar amount is useful in determining a selling price for 1 pound of the chemical?