Question

FIFO Method, Physical Flow, Equivalent Units, Unit Costs, Cost Assignment

Swasey Fabrication, Inc., manufactures frames for bicycles. Each frame passes through three processes: Cutting, Welding, and Painting. In September, the Cutting Department of the Tulsa, Oklahoma, plant reported the following data:

In Cutting, all direct materials are added at the beginning of the process.

Beginning work in process consisted of 41,000 units, 20 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $1,215,000; direct labor, $222,000; and applied overhead, $150,000.

Costs added to production during the month were direct materials, $2,575,000; direct labor, $3,471,250. Overhead was assigned using the following information:

Activity		Rate		Actual Driver Usage
Inspection		$150 per inspection hour		4,000 inspection hours
Maintenance		$750 per maintenance hour		1,600 maintenance hours
Receiving		$300 per receiving order		2,000 receiving orders

At the end of the month, 121,000 units were transferred out to Welding, leaving 14,000 units in ending work in process, or 25 percent complete.

Assume that the FIFO method is used.

Required:

1. Prepare a physical flow schedule.

Swasey Fabrication, Inc.
Physical Flow Schedule
Units to account for:
Units, beginning work in process
Units started (transferred in)
Total units to account for
Units accounted for:
Units completed and transferred out
Units, ending work in process
Total units accounted for

2. Calculate equivalent units of production for direct materials and conversion costs.

	Equivalent Units
Direct Materials
Conversion Costs

3. Compute unit cost. Round unit costs & final answer to three decimal places.
$ per unit

4. Calculate the cost of goods transferred to Painting at the end of the month. In your calculations, round unit costs to three decimal places. Round your final answer to the nearest dollar.
$

Calculate the cost of ending inventory. In your calculations, round unit costs to three decimal places. Round your final answer to the nearest dollar.
$

Answer 1

Step for solution
Step 1	Equivalent Units of production = Physical units multiplied by % of competition
Step 2	Calculate total cost to be accounted for
Step 3	Cost per Equivalent Unit =Cost incurred during Month / Equivalent Units of production
Step 4	Cost assigned to units transferred out = Cost in beginning WIP + Cost incurred for complete beginning WIP + Cost of units in Started and completed
Step 5	Cost assigned to units ending work in progress = equivalent units in ending WIP inventory * Cost per Equivalent Unit
For direct material 100% unit completed in previous period. It means remaining 0% completed in this month.
For conversion cost 20% unit completed in previous period. It means remaining 80% completed in this month.
Inspection (150*4000)		600,000
Maintenance (750*1600)		1,200,000
Receiving (300*2000)		600,000
Total overhead applied		2,400,000
Direct labor cost		3,471,250
Conversion Cost		5,871,250

Swasey Fabrication, Inc.
Cutting Department production Report
First in First out (FIFO) Method
Month ended
Summary of Physical units
Units in beginning WIP inventory			41000
Units started during month (135000-41000)			94000
Total unit to be accounted for			135000
Units completed and transferred out			121000
Units in ending WIP inventory			14000
Total unit accounted for			135000
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	41000	0%	0	80%	32800
Units in Started and completed (121000-41000)	80000	100%	80000	100%	80000
units in ending WIP inventory	14000	100%	14000	25%	3500
Equivalent Units of production			94000		116300
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	1,215,000	372000	1587000
Cost incurred during Month (Add)	2,575,000	5,871,250	8446250
total cost to be accounted for	3790000	6243250	10033250
cost per Equivalent Unit
Cost incurred during Month	2575000	5871250
Equivalent Units of production	94000	116300
Cost per Equivalent Unit	27.394	50.484	77.878
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
Direct material	1215000
Conversion Cost	372000
Cost in beginning WIP		1587000
Direct material (0*27.394)	0
Conversion Cost (32800*50.484)	1655875
Cost incurred for complete beginning WIP		1655875
Direct material (80000*27.394)	2191520
Conversion Cost (80000*50.484)	4038720
Cost of units in Started and completed		6230240
cost assigned to units transferred out		9473115
cost assigned to units ending work in progress
Direct material (14000*27.394)	383516
Conversion Cost (3500*50.484)	176694
cost assigned to units ending work in progress		560210
Total cost assigned		10033325
Difference due to rounding		75