Question

Exercise 6.21 FIFO M OBJECTI se 6.21 FIFO Method, Unit Cost, Valuation of Goods Transferred Out, and Ending Work in Process Dama Company produces women's blouses and uses the FIFO method to account for its manu- facturing costs. The product Dama makes passes through two processes: Cutting and Sewing. During April, Dama's controller prepared the following equivalent units schedule for the Cutting Department: Direct Materials Conversion Costs Units started and completed 40,000 40,000 Units, beginning work in process: 10,000 X 0% 10,000 X 50% 5,000 Units, ending work in process: 20,000 X 100% 20,000 20,000 x 25% 5,000 Equivalent units of output 60,000 50,000 Costs in beginning work in process were direct materials, $20,000; conversion costs, $80,000. Manufacturing costs incurred during April were direct materials, $240,000; conversion costs, $320,000. Required: 1. Prepare a physical flow schedule for April. 2. Compute the cost per equivalent unit for April 3. Determine the cost of ending work in process and the cost of goods transferred out. 4. Prepare the journal entry that transfers the costs from Cutting to Sewing.

Answer 1

Solution 1:

Reconciliation of Physical units
Particulars	Physical Units	Particulars	Physical Units
Beginning units	10000	Unit Completed	50000
Unit started	60000	Ending Units	20000
Total Units	70000	Total Units	70000

solution 2:

Dama Company
Cutting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$560,000.00	$240,000.00	$320,000.00
Equivalent units		60000	50000
Cost per equivalent unit		$4.00	$6.40

Solution 3:

Dama Company
Cutting Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$100,000	$20,000	$80,000
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (5000 * $6.40)	$32,000		$32,000
Total Cost from beginning inventory	$132,000	$20,000	$112,000
Current cost of unit started and completed:
Material (40000*$4)	$160,000	$160,000
Conversion (40000*6.40)	$256,000		$256,000
Total cost of unit started and completed	$416,000	$160,000	$256,000
Total cost of unit transferred out	$548,000	$180,000	$368,000
Cost assigned to ending WIP:
Material (20000*$4)	$80,000	$80,000
Conversion (5000*$6.40)	$32,000		$32,000
Total ending WIP inventory	$112,000	$80,000	$32,000
Total cost accounted for	$660,000	$260,000	$400,000

solution 4:

Journal Entries - Dama Company
S. No.	Particulars	Debit	Credit
1	Work In Process - Sewing Department Dr	$548,000.00
	To Work In Process - Cutting Department		$548,000.00
	(Being cost of goods completed in cutting transferred to Sewing department)