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In: Accounting

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

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:

Direct Materials Conversion Costs
Units started and completed 40,000 40,000
Units, beginning work in process:
12,000 × 0%
12,000 × 50% 6,000
Units, ending work in process:
20,000 × 100% 20,000
20,000 × 25% 5,000
Equivalent units of output 60,000 51,000

Costs in beginning work in process were direct materials, $25,000; conversion costs, $70,000. Manufacturing costs incurred during April were direct materials, $180,000; conversion costs, $326,400.

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

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 $

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

Work in Process-Sewing
Work in Process-Cutting

Solutions

Expert Solution

1. Prepare a physical flow schedule for April.

Dama Company
Physical Flow Schedule
Units to account for:
Units, beginning work in process 12000
Units started (40000+20000)) 60000
Total units to account for 72000
Units accounted for:
Started and completed 40000
Units, beginning work in process 12000
Units, ending work in process 20000
Total units accounted for 72000

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

180000/60000 = 3; 326400/51000 = 6.40
$9.40 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 (20000*3+5000*6.4) $92000
Cost of goods transferred out (40000*3+46000*6.4+95000) $509400

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

Work in Process-Sewing 509400
Work in Process-Cutting 509400

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