Measuring product costs for two periods On July 1 the Haymore Company started to manufacture gas valve regulators, a new product for the company. The company purchases rough cast valve housing from a supplier. In the first process center the valves are machined, drilled, and threaded. The housing are then transferred to the Finishing department where they are polished and fittings added. Finally the valves are transferred to Packaging where they are tested and packaged for shipment.

Below are production and cost data for the first two months of operations in the first process center. Machining. The company use average costing for costing production inventory flows.

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July No beginning work in process. 9,000 units started during the month. Direct materials cost in July was $31,500. Conversion cost in July was $36,000. 7,000 units are completed and transferred to Finishing. Ending work in process was 2,000 units with all materials and 1/2 conversion. August 10,000 units are started during August. Direct material cost in August was $35,600. Conversion cost in August was $37,200. 8,000 units are completed and transferred to Finishing. Ending work in process was 4,000 units with all materials and 1/4 conversion.