Question

The same problem under FIFO method

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: Required: Using the weighted average method, prepare the following for the Molding Department: A physical flow schedule An equivalent units calculation Calculation of unit costs. Round to four decimal places. Cost of ending work in process and cost of goods transferred out c. A cast reconciliation Prepare journal entries that show the flow of manufacturing costs for the Molding Department. Materials are added at the beginning of the process. Repeat Requirements 1 and 2 for the Assembly Department.

Answer 1

6.37: Molding department:

		Molding Department
Units, BWIP			10000
Units Started at February			25000
Total units to account for			35000
Units, BWIP			10000
Units Started and completed			20000
Units, EWIP			5000
Total units accounted for			35000

			Direct Materials		Conversion Costs
United started and completed			20000		20000
Units, BWIP			0		6000
Units, EWIP			5000		4000
Total Equivalent units			25000		30000

Calculations and explanations: BWIP units = BWIP units*(1-beginning inventory % completion) = 10,000*(1-40%)

Cost computation:

		Direct Material		Conversion costs
Cost in BWIP		22,000		13,800
Cost added		56,250		103,500
Total cost		78,250		117,300
					Total Units
Unit Costs		2.25		3.45	5.7

Unit costs = costs added/total equivalent units

Cost, BWIP					35,800
Cost Added					159,750
Total Cost to account for					195,550

Calculations: costs added = direct materials+conversion costs = 56250+103500 = 159750

Cost of Goods Started and transferred out				114000
Incurred cost, BWIP				20700
Cost, BWIP				35,800
Total cost of goods transferred out					170,500
Cost, EWIP
Direct Materials				11250
Conversion Costs				13800	25050
Total cost accounted for					195,550

Calculations: costs of goods started and transferred out = total units costs*units started and completed

Incurred cost, BWIP = conversion unit costs*units BWIP

Cost, BWIP = direct materials+conversion costs

Direct materials = Total unit costs of direct materials*Units EWIP (Direct materials)

Conversion costs = Total unit costs of conversion*Units EWIP (conversion)

Journal entries:

		Dr	Cr
WIP - molding		56,250
	Materials Inventory		56,250
WIP-Molding		103,500
	Conversion Costs		103,500
WIP-Assembly		170,500
	WIP-Molding		170,500

The same formulas and method has been used for Assembly department.

			Assembly
Units, BWIP			8,000
Units Started at February			30,000
Total units to account for			38,000
Units, BWIP			8,000
Units Started and completed			27,000
Units, EWIP			3,000
Total units accounted for			38,000

			Direct Materials		Conversion Costs		Transferred in
United started and completed			27,000		27,000		27,000
Units, BWIP			8,000		4,000		0
Units, EWIP			0		1500		3,000
Total Equivalent units			35,000		32,500		30,000

		Direct Material		Conversion costs		Transferred in
Cost in BWIP		0		16,800		45,200
Cost added		39,550		136,500		170500
Total cost		39,550		153,300		215,700		total cost
Unit Costs		1.13		4.2		5.683333		11.01333

Cost, BWIP						62,000
Cost Added						346,550
Total Cost to account for						408,550
Cost of Goods Started and transferred out					297360
Incurred cost, BWIP					25840
Cost, BWIP					62,000
Total cost of goods transferred out						385,200
Cost, EWIP
Direct Materials					6300
Conversion Costs					17050	23350
Total cost accounted for						408,550

Journal entries:

			Dr	Cr
WIP - Assembly			39,550
	Materials Inventory			39,550
WIP - Assembly			136,500
	Conversion Costs			136,500
Finished Goods			385,200
	WIP - Assembly			385,200