Question

The Inventory at July 1st and the cost charged to work in process department B during July for the Parker Corporation are as follows:

32,000 units, 3/4 completed...................................1,312,000

From Department A 174,000 units.........................1,566,000

Direct Labor............................................................5,848,000

Factory Overhead...................................................1,292,000

During July, all direct materials are transferred from Department A, the units in process at July 1st were completed, and of the 174,000 units entering the Department, all were completed except 36,000 units which were 2/3 completed. Inventories are costed by the FIFO method.

Use the 5 Steps to prepare a cost of production report:

1. Units to be accounted for: Beginning WIP + Transferred In = Total

2.Units to be accounted for: Beginning WIP + Started and Completed + Ending WIP = Total

3. Equivalent Units of Production & Cost per EUP

4.Cost to be accounted for: Beg. WIP + Materials + Direct Labor + Overhead = Total Cost to be accounted for

5. Cost accounted for: Total cost of beginning WIP + Total cost for started and completed + Total Cost for ending WIP = Total cost accounted for

Answer 1

• All working forms part of the ANSWER
• Step #1

Units Reconciliation
Units to account for:
Beginning WIP	32,000
Units started this period	174,000
Total Units to account for	206,000

• Step #2

Units Reconciliation
Total Units accounted for:
Beginning WIP	32,000
Completed & Transferred out	138,000
Ending WIP	36,000
Total Units accounted for	206,000

• Step #3

EUP - FIFO Method	Units	% Material	EUP Materials	Conversion fraction	EUP - Conversion
Units of ENDING WIP	36,000	100%	36,000	2/3	24,000
Units STARTED & COMPLETED	138,000	100%	138,000	100%	138,000
Units of beginning WIP	32,000	0%	-	1/4	8,000
Equivalent Units of Production			174,000		170,000
COST per EUP			Material		Conversion
Cost incurred this period			$    1,566,000.00		$              7,140,000.00
Total Costs		Costs	$    1,566,000.00	Costs	$              7,140,000.00
Equivalent units of production		EUP	174,000	EUP	170,000
Cost per EUP			$             9.00		$                     42.00

• Step #4

Cost of be accounted for:	TOTAL	Transferred in Cost	Direct labor + factory Overhead
Costs in beginning WIP Inventory	$                 1,312,000.00
Current Period Costs	$                 8,706,000.00	$ 1,566,000.00	$    7,140,000.00
Total Cost to be accounted for	$               10,018,000.00	$ 1,566,000.00	$    7,140,000.00

• Step #5

COST ACCOUNTED FOR
Cost Transferred out:	EUP	Cost per EUP	Total Cost
Cost of Beginning WIP			$    1,312,000.00
Cost to complete beginning WIP-
- Direct Materials	-	$                   9.00	$                         -
- Conversion	8,000	$                 42.00	$       336,000.00
Total cost to complete beginning WIP			$    1,648,000.00
Cost of Units started & completed this period:	EUP	Cost per EUP	Total Cost
- Direct Materials	138,000	$                   9.00	$    1,242,000.00
- Conversion	138,000	$                 42.00	$    5,796,000.00
Total costs started & Completed this period			$    7,038,000.00
Total cost of work finished this period				$         8,686,000.00
Costs of Ending WIP:	EUP	Cost per EUP	Total Cost
- Direct Materials	36,000	$                   9.00	$       324,000.00
- Conversion	24,000	$                 42.00	$    1,008,000.00
Total cost of ending WIP				$         1,332,000.00
Total costs accounted for				$       10,018,000.00