Question

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			45,000				45,000
Units, beginning work in process:
14,000 × 0%			—				—
14,000 × 50%			—				7,000
Units, ending work in process:
20,000 × 100%			20,000				—
20,000 × 25%			—				5,000
Equivalent units of output			65,000				57,000

Costs in beginning work in process were direct materials, $20,000; conversion costs, $80,000. Manufacturing costs incurred during April were direct materials, $260,000; conversion costs, $364,800.

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 started
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.

Answer 1

• Requirement 1

Dama Company
Physical Flow Schedule
Units to account for:
Units, beginning work in process	14,000
Units started	45,000
Total units to account for	59,000
Units accounted for:
Units, beginning work in process completed	14,000
Units Started and completed	25,000
Units, ending work in process	20,000
Total units accounted for	59,000

• Requirement 2

		Material cost	Conversion Cost	Total
A	Manufacturing cost incurred	$260,000	$364,800
B	Equivalent units	65,000	57,000
C = A / B	Cost per equivalent unit	$4.00	$6.40	$10.40

• Requirement 3

Cost of ending work in process	$112,000	[(20000 units x $4) + (5000 units x $6.40)]
Cost of goods transferred out	$512,800	[(7000 units x $6.40) + (45000 units x $10.40)]

• Requirement 4

Date	Accounts title	Debit	Credit
30-Apr	Work in Process Inventory - Sewing Department	$512,800
	Work in Process Inventory - Cutting Department		$512,800
	(Cost of goods transferred to Sewing)