Question

The following information is known about a company’s second department in the process costing system for the latest period:

Beginning Inventory: 12000 units that are 60% complete for conversion costs

Ending Inventory 15000 units that are 40% complete for conversion costs

Units transferred in from the first department 30000 units

Materials are added at the end of the process in Department 2

	Costs
	Materials	Conversion Costs	Transferred in Costs
Beginning Inventory (prior period costs)	$41,250	$47,120	$50,000
Current period Costs	$114,750	$92,880	$100,000

Required:

1. Choose either the Weighted Average Approach or the FIFO Approach to for part 1 of this problem. Write the method that you have chosen CLEARLY at the top of the production cost report.  

Answer 1

Ans	FIFO Approach
	Particulars	Units	% of Completion for Conversion Cost
	Opening WIP	12000	40%
	Units Transferred from first Department	30000
	Ending WIP	15000	40%
	Completed During Period	27000	100%
	Even though given that Materials will be added in Department2 at Process end but material cost given in Opening Inventory so It is assumed that Materials will be added during process and 100%
	Transferred Cost also 100%
	Equivalent Units	Units	%	Equivalent Units
	Opening WIP	12000	40%	4800
	Completed Units	15000	100%	15000
	Closing WIP	15000	40%	6000
	Equivalent Units			25800
	Particulars	Equivalent Units	Cost	Cost per Unit
	Materials	30000	$ 1,14,750.00	$               3.83
	Conversion Costs	25800	$     92,880.00	$               3.60
	Transferred In Costs	30000	$ 1,00,000.00	$               3.33
	Cost per Unit			$             10.76
	Cost of Goods Completed	Units
		Materials	Conversion Cost	Transferred In	Total
	Opening Cost	$ 41,250.00	$     47,120.00	$     50,000.00	$ 1,38,370.00
	Current Cost	$ 57,450.00	$     71,280.00	$     50,000.00	$ 1,78,730.00
	Total				$ 3,17,100.00
	Closing WIP	Equivalent Units	Cost per Unit	Cost
	Materials	15000	$               3.83	$     57,375.00
	Conversion Costs	6000	$               3.60	$     21,600.00
	Transferred In Costs	15000	$               3.33	$     50,000.00
	Total Cost of WIP			$ 1,28,975.00