Question

Problem 20-5AA FIFO: Process cost summary; equivalent units; cost estimates LO C3, C4, P4

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Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 32,700 units of product to finished goods inventory. Its 5,100 units of beginning work in process consisted of $198,960 of direct materials and $729,564 of conversion costs. It has 3,450 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $683,100 of direct material costs and $3,702,936 of conversion costs were charged to production.

Beginning work in process consisted of 5,100 units that were 100% complete with respect to direct materials and 40% complete with respect to conversion.

Of the 32,700 units completed, 5,100 were from beginning work in process. The remaining 27,600 were units started and completed during May.

Assume that Tamar uses the FIFO method to account for its process costing system.

Problem 20-5A Part 1

1. Prepare the company’s process cost summary for May using the FIFO method. (Round "Cost per EUP" to 2 decimal places.)
2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.

Answer 1

• All working forms part of the answer
• Requirement 1

Since no format of Cost Summary is available, I’m providing every detail required for such summary report in a Report Format.

Units Reconciliation
Units to account for:
Beginning WIP	5,100
Units started this period	31,050
Total Units to account for	36,150
Total Units accounted for:
Completed & Transferred out	32,700
Ending WIP	3,450
Total Units accounted for	36,150

EUP - FIFO Method	Units	% Material	EUP Materials	% Conversion
Units of ENDING WIP	3,450	100%	3,450	80%
Units STARTED & COMPLETED	27,600	100%	27,600	100%
Units of beginning WIP	5,100	0%	-	60%
Equivalent Units of Production			31,050
COST per EUP			Material
Cost incurred this period			$       683,100.00
Total Costs		Costs	$       683,100.00	Costs
Equivalent units of production		EUP	31,050	EUP
Cost per EUP			$           22.00000
COST ASSIGNMENT & RECONCILIATION
Cost Transferred out:	EUP	Cost per EUP	Total Cost
Cost of Beginning WIP			$       928,524.00
Cost to complete beginning WIP-
- Direct Materials	-	$                 22.00	$                         -
- Conversion	3,060	$              110.80	$       339,048.00
Total cost to complete beginning WIP			$    1,267,572.00
Cost of Units started & completed this period:	EUP	Cost per EUP	Total Cost
- Direct Materials	27,600	$                 22.00	$       607,200.00
- Conversion	27,600	$              110.80	$    3,058,080.00
Total costs started & Completed this period			$    3,665,280.00
Total cost of work finished this period				$   4,932,852.00
Costs of Ending WIP:	EUP	Cost per EUP	Total Cost
- Direct Materials	3,450	$                 22.00	$          75,900.00
- Conversion	2,760	$              110.80	$       305,808.00
Total cost of ending WIP				$      381,708.00
Total costs accounted for				$   5,314,560.00

• Requirement 2

Accounts title	Debit	Credit
Finsihed Goods Inventory	$   4,932,852.00
Work In Process Inventory		$   4,932,852.00
(to record transfer of cost from WIP to Finsihed Goods)