Question

Austin Company manufactures a product called Aster in a three-process series. All materials are introduced at the beginning of the first process. Austin uses the first- first-out method of inventory costing. Unit and cost data for the first process (Department A) for the month of December follow: Units Completion Cost 60% 12,000 5,000 14,000 $140,400 7 Work in process inventory: December 1 December 31 Started in December Direct materials cost Conversion cost Completed in December 40% 106,400 70,310 ? 21,000 Prepare Austin's Department A cost of production report for December Round your cost per equivalent unit amounts to two decimal places. Round all other amounts to the nearest dollar. If an amount value is zero enter *O* as answer.

Answer 1

Austin Company Cost of Production Report (FIFO Method) - Department A For the Month Ended December 31 Unit Information Units charged to production: Inventory in proces, December 1 Received from materials store room Total units accounted for by the Department A 12,000 14,000 26,000 Equivalent Units Units to be assigned costs: Materials Conversion Inventory in proces, December 1 (60% complete) Started and Completed in December Transferred to Department B in December Inventory in proces, December 31(40% complete) Total units to be assigned costs Whole Units 12,000 9,000 21,000 5,000 26,000 0 9,000 9,000 5,000 14,000 4,800 9,000 13,800 2,000 15,800

Cost Information Materials Total cost for December in the Department A $106,400 Total Equivalent units 14,000 Cost per equivalent unit $7.60 Conversion $70,310 15,800 $4.45 Materials Conversion Costs assigned to production: Inventory in process, December 1 balance Costs incurred in December Total Costs accounted for by Department A Total $140,400 $176,710 $317,110 $21,360 Costs allocated to completed and partially completed units: Inventory in process, December 1 balance To complete inventory in process, December 1 $0 Cost of completed December 1 work in process Started and completed in December $68,400 Transferred to finished goods in December Inventory in process, December 31 $38,000 Total costs assigned by Department A $40,050 $140,400 $21,360 [Material = 0 x $7.60; Conversion = 4800 x $4.45] $161,760 $108,450 [Material = 9000 x $7.60; Conversion = 9000 x $4.45] $270,210 $46,900 [Material = 5000 x $7.60; Conversion = 2000 x $4.45] $317,110 $8,900

Workings: Under FIFO method, equivalent units would consist efforts required to complete the beginning inventory, efforts put for completed and transferred out goods and ending inventory. As the materials are introduced at the beginning itself, beginning inventory is 100% complete in terms of materials, 0% efforts would be required in current process or period whereas conversion costs would require the uncompleted portion of costs in current process or period. That is, conversion was complete 60% already and so 40% efforts would be required in current period. Units in beginning inventory Add: Units started during the period Less: Units in ending inventory Units completed and transferred out 12,000 14,000 -5,000 21,000 --> Of which 12000 units shall be from beg. inventory; Bal. 9000 units from current period.

Particulars Physical Units 12,000 9,000 21,000 5,000 26,000 % Materials 0% 100% Beginning work in process Started, Completed and transferred Transferred to next process Ending work in process Equivalent Units of Production (EUP) EUP Materials 0 9,000 9,000 5,000 14,000 % EUP Conversion Conversion 40% 4,800 100% 9,000 13,800 40% 2,000 15,800 [12000 units x 0%; 12000 units x 40%] [9000 units x 100%; 9000 units x 100%] 100% [5000 units x 100%; 5000 units x 40%] Cost per equivalent units of production Direct Materials Conversion [Under FIFO method, it shall not be considered here] [Conversion = 180% of direct labor cost including overhead = $19,984 x 180% = $35,971] Cost of beginning work in process Cost added during the period Total current costs added Equivalent units of Production (EUP) Cost per Equivalent units of Production $106,400 $106,400 14,000 $7.60 $70,310 $70,310 15,800 $4.45 [As computed EUP schedule presented above] [Materials = $106400 / 14000 units = $7.60; Conversion = $70310 / 15800 = $4.45]

Cost per Cost of goods completed & transferred EUP Totals EUP Cost of goods completed & trfd from beginning $140,400 9,000 13,800 $7.60 $4.45 Materials - Current Cost Labor - Current Cost Cost of goods completed & trfd from current Total Cost of goods completed & transferred $68,400 [9000 units x $7.60] $61,410 [13800 units x $4.45] $129,810 $270,210 [$140400 + $129810] Cost per Cost of ending work-in-process EUP Totals Materials Labor Total cost of ending work-in-process 5,000 2,000 EUP $7.60 $4.45 $38,000 $8,900 $46,900 (5000 units x $7.60] [2000 units x $4.45]