Question

FIFO Method, Unit Cost, Valuation of Goods Transferred Out and Ending Work in Process

Dama Company produces women's blouses and uses the FIFO method to account for its manufacturing costs. The product Dama makes passes through two processes: Cutting and Sewing. During April, Dama's controller prepared the following equivalent units schedule for the Cutting Department:

		Direct Materials				Conversion Costs
Units started and completed			45,000				45,000
Units, beginning work in process:
14,000 × 0%			—				—
14,000 × 50%			—				7,000
Units, ending work in process:
20,000 × 100%			20,000				—
20,000 × 25%			—				5,000
Equivalent units of output			65,000				57,000

Costs in beginning work in process were direct materials, $20,000; conversion costs, $80,000. Manufacturing costs incurred during April were direct materials, $260,000; conversion costs, $364,800.

Required:

1. Prepare a physical flow schedule for April.

Dama Company
Physical Flow Schedule
Units to account for:
Units, beginning work in process
Units started
Total units to account for
Units accounted for:
Started and completed
Units, beginning work in process
Units, ending work in process
Total units accounted for

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1. A physical flow schedule shows the units to account for and what happened to them.

2. Compute the cost per equivalent unit for April. If required, round your answer to the nearest cent.
$ per equivalent unit

3. Determine the cost of ending work in process and the cost of goods transferred out.

Cost of ending work in process	$
Cost of goods transferred out	$

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2. The equivalent units schedule measures the output of the period. A fully completed unit is counted as a unit of output. Output for a unit in ending work in process is counted by its degree of completion.

3. Unit cost = Costs of the period ÷ Output of the period. The cost of goods (services) transferred out is the unit cost multiplied by the units completed. The cost of EWIP is the unit cost multiplied by the equivalent units found in EWIP.

4. Prepare the journal entry that transfers the costs from Cutting to Sewing.

	Work in Process-Sewing
	Work in Process-Cutting

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4. The partially completed units and all their associated costs are transferred to the next process by debiting the WIP account of the process receiving the unit and crediting the WIP account of the transferring department.

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Partially correct

Answer 1

Solution:

Calculation of Equivalent Units

Calculation of Cost per Equivalent unit

Calculation of Cost of goods transferred and cost of ending inventory

Journal entry that transfers the costs from Cutting to Sewing.

Hope this helps! In case of any clarifications, kindly use the comment box below