Bakul Mala Manufacturing, which uses the First-In, First-Out costing method, produces a product that passes through...

Bakul Mala Manufacturing, which uses the First-In, First-Out costing method, produces a product that passes through two departments: A and B. In the Department A, all materials are added at the beginning of the process and all other manufacturing inputs are added uniformly.

The following information relates to Department A for the month of July:

a. Beginning Work-In-Process, 1 July: 400,000 units (20% complete with respect to conversion costs). The costs assigned to this work are as follows:

Direct Materials = $80,000
Conversion costs = $40,000

b. Ending Work-In-Process, 31 July: 100,000 units (80% complete with respect to conversion costs).

c. Units completed and transferred out: 500,000 units.

The following costs were added during July:

Direct Materials = $200,000
Conversion Costs = $100,000

Required:

SHOW CALCULATION FOR EACH QUESTION IN THE RESPONSE BOX.

1. Prepare a physical flow schedule.

2. Prepare a schedule of equivalent units.

3. Calculate the cost per equivalent unit.

4. Calculate the cost of goods transferred out and the cost of Ending Work-In-Process.

5. Would you recommend Bakul Mala Manufacturing to continue to employ the First-In, First-Out costing method, or should it consider alternative costing methods (i.e. the weighted average method)? Briefly explain and justify your recommendation.

Solutions

Expert Solution

Part-1 : Physical Flow
Beginning WIP inventory	400000
Units started (100000+500000-400000)	200000
Less: Ending inventory	100000
Units completed and transferred	500000

Part-2 Statement showing Computation of Equivalent Unit- FIFO- Bakul Mala Manufacturing
Particular	Whole units	Materials	Conversion
Beginign WIP (100%, 80%)	400000	0	320000
Unit Started & Completed	100000	100000	100000
Ending inventory (100%, 80%)	100000	100000	80000
Units accounted for	600000	200000	500000
Equivalent Unit of Production
	Materials	Conversion
Equivalent units of production	200000	500000

Part-3 Statement showing Cost per Equivalent Unit
Particular	Tototal	Material	Conversion
Current costs incurred	$300,000.00	$200,000.00	$100,000.00
Tototal cost to account for (a)	$300,000.00	$200,000.00	$100,000.00
Equivalent units (b)		200000	500000
Cost per Equivalent unit (a/b)		$1.00	$0.20

Computation of Ending WIP
Material (100000*1)	$100,000.00
Conversion (80000*0.20)	$16,000.00
Tototal Ending Work in process	$116,000.00

Computation of Cost of units completed and transferred
Material (100000*1)	$100,000.00
Conversion (420000*0.20)	$84,000.00
Tototal	$184,000.00

ekkarill92 answered 1 year ago

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