Question

Question 4:

Sprinkler Co. utilizes process costing in its manufacturing company for a product that passes through two departments. Data relating to the product processed in Department 2, during March are presented as follows:

Beginning WIP Inventory had total costs of $119,000. Of this amount, $19,000 related to direct materials. The remainder related to conversion costs.

During the period, the following costs were added: $62,080 of direct materials and $396,240 of conversion costs.

Additional information is available as follows:

	Physical Units	Percentage of Completion
Beginning WIP	6,000	10% – direct materials 40% – conversion costs
Units brought into production and fully completed during period	29,000
Ending WIP	11,000	40% - direct materials 50% - conversion costs

Required:

a. Compute the equivalent units for the month for Department 2, according to the FIFO method of accounting for units.
b. Calculate the cost per equivalent unit using the FIFO method of costing. Round answer to two decimal places.
c. Prepare a cost reconciliation report for the period for Department 2 using the FIFO method of costing.

Answer 1

	Sprinkler Co
	Production Cost Report (FIFO)
		Actual Units
	Calculation of Physical UNITS:
	Units in beginning inventory	6000
	Units started during the period	29000
	Units to be accounted for	35000
		Actual Units	Equivalent Units
			Material	CC
	Units Completed and Transferred	24,000
	From units in beginning inventory	6,000	5,400	3,600
	From units started	18,000	18,000	18,000
	Units in ending inventory	11,000	4,400	5,500
A)	Equivalent Unit of production	35,000	27,800	27,100
	Costs:
		Total	Material	CC
	Costs in beginning inventory	0	0	0
	Cost added during the year	458320	62080	396240
	Total cost to account for	458320	62080	396240
	Equivalent Units from above		27800	27100
B)	Cost per equivalent unit	16.85	2.23	14.62
C)		Total	Material	CC
	Cost Accounted for
	Units completed and transfer	0	0	0
	From units in beginning inventory	64,696	12,059	52,637
	From units started	303,381	40,196	263,185
	Total Cost of units transferred out	368,077	52,254	315,822
	Units in ending inventory	90,243	9,826	80,418
	Total Cost Accounted for	458,320	62,080	396,240