Question

FIFO Method, Two-Department Analysis Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February: Molding Assembly Beginning inventories: Physical units 10,000 8,000 Costs: Transferred in $45,400 Direct materials $22,000 $13,800 $16,700 Conversion costs Current production: Units started 25,000 ? 30,000 35,000 Units transferred out Costs: Transferred in ? Direct materials $56,750 $39,550 Conversion costs $106,500 $143,000

Answer 1

1.d)	Cost of ending WIP				$     25,550.00
	Cost of goods transferred out				$ 1,72,700.00
e)	Costs to account for:
	Beginning WIP				$     35,000.00
	Costs incurred				$ 1,63,250.00
	Total costs to account for				$ 1,98,250.00
	Costs accounted for:
	Transferred out				$ 1,72,700.00
	Ending WIP				$     25,550.00
	Total costs accounted for				$ 1,98,250.00

2)	Journal Entries
	Events	Particulars			Debit	Credit
	a)	Work in Process - Molding			$     56,750.00
		To Materials Inventory				$     56,750.00
	b)	Work in Process - Molding			$ 1,06,500.00
		To Conversion Costs - Control				$ 1,06,500.00
	c)	Work in Process - Assembly			$ 1,72,700.00
		To Work in Process - Molding				$ 1,72,700.00

Workings:

A)	Statement of equivalent production					Degree of completion
						Direct Material			Conversion
	Particulars	Units	Particulars	Units		%	Units		%	Units
	Beginning WIP	10000	Transfer to next process:
	Units Started	25000	From Beginning WIP	10000		-	-		60%	6000
			From Units Started	20000		100%	20000		100%	20000
			Ending WIP	5000		100%	5000		80%	4000
		35000		35000			25000			30000

Statement of cost per equivalent production
Element of costs	Units	Costs	Cost/eq. units
Direct Material	25000	$        56,750.00	$                  2.27
Conversion	30000	$     1,06,500.00	$                  3.55
			$                  5.82

Statement of evaluation
Cost of Finished Goods
Existing cost of 10000 units =		$       35,000.00	($ 22000 + $ 13800)
Cost of Completing 6000 units:
Conversion cost =		$       21,300.00	( 6000 x $ 3.55)
Cost of 20000 units =		$    1,16,400.00	(20000 x $ 5.82)
	Total	$   1,72,700.00
Cost of Ending WIP
	Units	Cost/eq. units	Costs
Direct Material	5000	$                 2.27	$    11,350.00
Conversion	4000	$                 3.55	$    14,200.00
		Total	$    25,550.00