FIFO Method, Unit Cost, Valuation of Goods Transferred Out and Ending Work in Process

Dama Company produces women's blouses and uses the FIFO method to account for its manufacturing costs. The product Dama makes passes through two processes: Cutting and Sewing. During April, Dama's controller prepared the following equivalent units schedule for the Cutting Department:

Weighted Average Method, Journal Entries

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				$45,200
Direct materials		$22,000
Conversion costs		$13,800		$16,800
Current production:
Units started		25,000		?
Units transferred out		30,000		35,000
Costs:
Transferred in				?
Direct materials		$56,750		$39,550
Conversion costs		$106,900		$140,150
Percentage of completion:
Beginning inventory		40%		50%
Ending inventory		80		50

Required:

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

a. A physical flow schedule

Molding Department, Physical flow schedule:
Units to account for:
Units, beginning work in process
Units started in February
Total units to account for
Units accounted for:
Units completed and transferred out:
Started and completed
From beginning work in process
Units, ending work in process
Total units accounted for

Feedback

a. The physical flow schedule traces the units in process regardless of their stage of completion.

b. An equivalent units calculation

	Total equivalent units
Direct Materials
Conversion Costs

c. Calculation of unit costs. Round your intermediate computations and final answer to four decimal places. $ per unit

d. Calculate the cost of ending work in process and cost of goods transferred out. Round your answers to the nearest dollar. Cost of ending work in process: $ Cost of goods transferred out: $

e. A cost reconciliation. When required, round your answers 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	$

Feedback

b. To calculate equivalent units, weighted average counts prior-period output in BWIP as belonging to the current period. All units are output in the current period.

c. To calculate unit cost, refer to the applicable formula in the textbook.

d. Costing out ending work in process is done by computing the cost of each input and then adding to obtain the total. The valuation of cost of goods transferred out is simplified as it is the total unit cost multiplied by the units completed.

e. Reconciliation is making sure that the costs assigned to goods or services completed and EWIP are equal to the costs to account 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. When required, round your answers to the nearest dollar.

a.	Work in Process-Molding
	Materials Inventory
b.	Work in Process-Molding
	Conversion Costs-Control
c.	Work in Process-Assembly
	Work in Process-Molding

Feedback

2. An example of journal entries showing the flow of costs is illustrated above Exhibit 6.5.

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

a. A physical flow schedule:

Assembly Department, Physical flow schedule:
Units to account for:
Units, beginning work in process
Units started in February (transferred in)
Total units to account for
Units accounted for:
Units completed and transferred out:
Started and completed
From beginning work in process
Units, ending work in process
Total units accounted for

Feedback

3. Read the problem carefully. There are some differences in how the material additions are accounted for.

b. An equivalent units calculation

	Total Equivalent Units
Direct Materials
Conversion Costs
Transferred In

c. Calculate the total unit costs. Round your intermediate computations and final answer to four decimal places. $ per unit

d. Calculate the cost of ending work in process and cost of goods transferred out. Round your answers to the nearest dollar. Cost of ending work in process: $ Cost of goods transferred out: $

e. A cost reconciliation. If required, round your answers 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 due to rounding error.

Feedback

3. Read the problem carefully. There are some differences in how the material additions are accounted for.

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.	Work in Process-Assembly
	Materials Inventory
b.	Work in Process-Assembly
	Conversion Costs-Control
c.	Finished Goods
	Work in Process-Assembly

Costs in beginning work in process were direct materials, $25,000; conversion costs, $70,000. Manufacturing costs incurred during April were direct materials, $260,000; conversion costs, $377,600.

Required:

1. Prepare a physical flow schedule for April.

Dama Company
Physical Flow Schedule
Units to account for:
Units, beginning work in process
Units started
Total units to account for
Units accounted for:
Started and completed
Units, beginning work in process
Units, ending work in process
Total units accounted for

Feedback

1. A physical flow schedule shows the units to account for and what happened to them.

2. Compute the cost per equivalent unit for April. If required, round your answer to the nearest cent. $ per equivalent unit

3. Determine the cost of ending work in process and the cost of goods transferred out.

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

Feedback

2. The equivalent units schedule measures the output of the period. A fully completed unit is counted as a unit of output. Output for a unit in ending work in process is counted by its degree of completion.

3. Unit cost = Costs of the period Output of the period. The cost of goods (services) transferred out is the unit cost multiplied by the units completed. The cost of EWIP is the unit cost multiplied by the equivalent units found in EWIP.

4. Prepare the journal entry that transfers the costs from Cutting to Sewing.

	Work in Process-Sewing
	Work in Process-Cutting