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: Beginning inventories: Physical units Molding Assembly 10,000 8,000 Costs: Transferred in $45,300 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 $56,250 $40,250