Question

Question 3:

Train Co. utilizes process costing for its main product, toy trains. Data relating to toy trains processed in Department 1, Moulding, during August are presented as follows:

	Toy Trains	Percentage Completed*
Work in Process, beginning	40,000	70%
Started into Process during Period	60,000
Work in Process, ending	20,000	30%
* relates to conversion costs

* related to conversion costs

Materials are added at the beginning of the process in Department 1.

Costs in beginning work in process inventory were $250,000 of direct materials and conversion cost of $500,000. Costs added during the period were $390,000 for direct materials and conversion costs of $780,000.

The company uses the FIFO method of accounting for units.

Required:

a. Prepare a quantity schedule.
b. Compute the equivalent units for the period according to the FIFO method of accounting for units.
c. Calculate the cost per equivalent unit using the FIFO method. Round answer to two decimal places.

Answer 1

	Train Co.
	Production Cost Report (FIFO)
a)		Actual Units
	Calculation of Physical UNITS:
	Units in beginning inventory	40000
	Units started during the period	60000
	Units to be accounted for	100000
		Actual Units	Equivalent Units
			Material	CC
	Units Completed and Transferred	80000
	From units in beginning inventory	40000	0	12000
	From units started	40000	40000	40000
	Units in ending inventory	20000	20000	6000
b)	Equivalent Unit of production	100000	60000	58000
	Costs:
		Total	Material	CC
	Costs in beginning inventory	0	0	0
	Cost added during the year	1170000	390000	780000
	Total cost to account for	1170000	390000	780000
	Equivalent Units from above		60000	58000
c)	Cost per equivalent unit	19.95	6.50	13.45