13. Test Company uses a normal, process costing system to determine product cost. The company uses the first-in, first-out (FIFO) method to account for equivalent units and costs in beginning work-in-process.

The product passes through two departments: Department 1 and Department 2. In Department 1, all direct materials are added at the beginning of the process. The following information is available for Department 1 in July.

Work-in-process, July 1
Units	5,000 units
Costs
Direct materials	$25,000
Conversion cost	16,000
July activity
Units
Started into production	50,000 units
Completed and transferred out	45,000 units
Costs added
Direct materials	$400,000
Conversion cost	183,750
Percentage of completion
Work-in-process, July 1	40%
Work-in-process, July 31	60%

Note: Round all calculations to two decimal points. Round dollar amounts to the nearest dollar.

The journal entry to record the cost transferred out of Department 1 in July would include

a. A debit to work-in-process inventory - Department 2

b. A debit to work-in-process inventory - Department 1

c. A debit to cost of goods manufactured - Department 1

d. No entry would be required

21. Three Company uses a process organized into two service or support departments (Support 1 and Support 2) and two producing departments (Production 1 and Production 2). Budgeted data for the four departments for the month of January are as follows.

	Support Departments			Producing Departments
	Support 1	Support 2		Production 1	Production 2
Overhead	$100,000	$268,000		$174,000	$126,000
Number of employees		200		400	400
Machine hours	1,000			3,000	1,000

Overhead cost for the Support 1 Department is allocated based on number of employees. Overhead cost for the Support 2 Department is allocated based on machine hours.

Note: Round all calculations to two decimal points. Round all dollar amounts to the nearest dollar.

Determine the total overhead cost for Production 1 using the reciprocal method to allocate service department costs.