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		—
Conversion costs		$13,800		$16,700
Current production:
Units started		25,000		?
Units transferred out		30,000		35,000
Costs:
Transferred in		—		?
Direct materials		$56,750		$40,250
Conversion costs		$106,500		$136,500
Percentage of completion:
Beginning inventory		40%		50%
Ending inventory		80		50

Required:

1. Using the FIFO method, prepare the following for the Molding Department:

a. A physical flow schedule

Muskoge Company
Molding Department
Physical Flow Schedule
Units to account for:
Total units to account for
Units accounted for:
Units completed and transferred out:
Total units accounted for

b. An equivalent units calculation

	Total Equivalent Units
Direct Materials
Conversion Costs

c. Calculation of unit costs. Round your answer to the nearest cent.
$ per unit

d. Cost of ending work in process and cost of goods transferred out.

Cost of ending work in process: $
Cost of goods transferred out: $

e. A cost reconciliation.

Costs to account for:
Beginning work in process	$
Costs incurred
Total costs to account for	$

Costs accounted for:
Transferred out	$
Ending work in process
Total costs accounted for	$

2. Prepare journal entries that show the flow of manufacturing costs for the Molding Department. (a) Materials are added at the beginning of the process, (b) conversion costs are recorded, and (c) units are transferred to the Assembly Department.

(a)
(b)
(c)

3. Repeat Requirements 1 and 2 for the Assembly Department.

a. A physical flow schedule

Muskoge Company
Assembly Department
Physical Flow Schedule
Units to account for:
Total units to account for
Units accounted for:
Units completed and transferred out:
Total units accounted for

b. An equivalent units calculation

	Total Equivalent Units
Direct Materials
Conversion Costs
Transferred In

c. Calculation of unit costs. If required, round your intermediate computations and final answer to four decimal places and use the rounded answer in subsequent computations.
$ per unit

d. Compute the following. For interim computations, carry amounts out to four decimal places. Round your final answers to the nearest dollar.

Cost of ending work in process: $
Cost of goods transferred out: $

e. A cost reconciliation. When necessary, round equivalent cost per unit to four decimal places, and round all other amounts to the nearest dollar.

Costs to account for:
Beginning work in process	$
Costs incurred
Total costs to account for	$

Costs accounted for:
Transferred out	$
Ending work in process
Total costs accounted for	$

Note: Cost reconciliation totals differ by $1 due to rounding error.

Prepare journal entries that show the flow of manufacturing costs for the Assembly Department. (a) Materials are added at the end of the process, (b) conversion costs are recorded, and (c) the units are transferred to Finished Goods.

(a)
(b)
(c)

Answer 1

Answer-1(a):

Physical Flow Schedule
Muskoge Company
Molding Department
Units in Beg. WIP	10,000
Units Started in February	25,000
Total units to account for:	35,000
Units in Beg. WIP	10,000
Units started and completed	20,000
Units in Ending WIP	5,000
Total units accounted for	35,000

Answer-1(b):

Equivalents Units of Production (EUP)
	Units	% Materials	EUP-material	% conversion	EUP-conversion
Unit completed out of Beginning WIP	10,000	0%	-	60%	6,000
Started and completed	20,000	100%	20,000	100%	20,000
Units in ending WIP	5,000	100%	5,000	80%	4,000
Equivalent units of production	35,000		25,000		30,000

Answer-1(c):

Cost per equivalent units of production:	Direct materials	Conversion
Cost of beginning WIP	$             22,000	$      13,800
Cost incurred this period	$             56,750	$    106,500
Total costs	$             78,750	$    120,300
Equivalent units of production	25,000	30,000
Cost per equivalent units of production	$                 3.15	$          4.01

Answer-1(d):

TOTAL COST REPORT
Production	Element of cost	EUP	Cost per EUP	Total Cost	Total Cost
Units transferred out	Direct Material	20,000	$             3.15	$         63,000	$            167,260
Conversion	26,000	$             4.01	$      104,260
Ending WIP	Direct Material	5,000	$             3.15	$         15,750	$              31,790
Conversion	4,000	$             4.01	$         16,040

Answer-1(e):

Costs to account for:
Beginning work in process	$          35,800
Costs incurred	$        163,250
Total costs to account for	$        199,050
Costs accounted for:
Transferred out	$        167,260
Ending work in process	$          31,790
Total costs accounted for	$        199,050

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