Question

FIFO Method, Equivalent Units, Unit Cost, Multiple Departments

Fordman Company has a product that passes through two processes: Grinding and Polishing. During December, the Grinding Department transferred 20,000 units to the Polishing Department. The cost of the units transferred into the second department was $40,000. Direct materials are added uniformly in the second process. Units are measured the same way in both departments.

The second department (Polishing) had the following physical flow schedule for December:

Units to account for:
Units, beginning work in process	4,000	(40% complete)
Units started	?
Total units to account for	?
Units accounted for:
Units, ending work in process	8,000	(50% complete)
Units completed	?
Units accounted for	?

Costs in beginning work in process for the Polishing Department were direct materials, $5,000; conversion costs, $6,000; and transferred in, $8,000. Costs added during the month: direct materials, $32,000; conversion costs, $50,000; and transferred in, $40,000.

Assume the company uses the FIFO method.

Required:

1-a. Prepare a schedule of equivalent units. Enter percentages as whole numbers.

Fordman Company
Schedule of Equivalent Units
For the month of December

	Direct Materials	Conversion Costs	Transferred In
Units started and completed
Units to complete in BWIP:			blank
x %
Units in EWIP:
x %	blank	blank
x %
Total equivalent units

Feedback

The FIFO method excludes the equivalent output and costs in BWIP when the current-period unit cost is calculated. FIFO follows the process-costing principle. When calculating costs of goods transferred out, two categories of completed units are needed: Units completed from BWIP and Units started and completed.

1-b. Compute the unit cost for the month of December. Round intermediate calculations and your final answer to the nearest cent.
$ per equivalent unit

Answer 1

Solution 1a:

Computation of Equivalent unit of Production - Polishing Department
Particulars	Physical Units	Transferred in cost	Material	Conversion
Units to account for:
Beginning WIP	4000
Started into Production	20000
Total units to account for	24000
Units from beginning WIP: Transferred in - 0% Material - 60% Conversion - 60%	4000	0	2400	2400
Units started and completed	12000	12000	12000	12000
Ending WIP: Transferred In - 100% Direct materials - 50% Conversion - 50%	8000	8000	4000	4000
Equivalent units of production	24000	20000	18400	18400

Solution 1b:

Computation of Cost per equivalent unit of Production - Polishing Department
Particulars	Transferred in cost	Material	Conversion
Current periods costs	$40,000.00	$32,000.00	$50,000.00
Equivalent units of production	20000	18400	18400
Cost per Equivalent unit	$2.00	$1.74	$2.72

Unit cost for the month of December = $2 + $1.74 + $2.72 = $6.46 per unit