Question

FIFO Method, Two-Department Analysis

Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February:

		Molding		Assembly
Beginning inventories:
Physical units		10,000		8,000
Costs:
Transferred in		—		$45,300
Direct materials		$22,000		—
Conversion costs		$13,800		$16,900
Current production:
Units started		25,000		?
Units transferred out		30,000		35,000
Costs:
Transferred in		—		?
Direct materials		$56,750		$40,250
Conversion costs		$106,500		$143,000
Percentage of completion:
Beginning inventory		40%		50%
Ending inventory		80		50

Required:

1. Using the FIFO method, prepare the following for the Molding Department:

a. A physical flow schedule

Muskoge Company
Molding Department
Physical Flow Schedule
Units to account for:
Units, beginning work in process
Units started in February (transferred in)
Total units to account for
Units accounted for:
Units completed and transferred out:
Started and completed
From beginning work in process
Units, ending work in process
Total units accounted for

Feedback

b. An equivalent units calculation

	Total Equivalent Units
Direct Materials
Conversion Costs

c. Calculation of unit costs. Round your answer to the nearest cent.
$ per unit

d. Cost of ending work in process and cost of goods transferred out.

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

e. A cost reconciliation.

Costs to account for:
Beginning work in process	$
Costs incurred
Total costs to account for	$

Costs accounted for:
Transferred out	$
Ending work in process
Total costs accounted for	$

Feedback

2. Prepare journal entries that show the flow of manufacturing costs for the Molding Department. (a) Materials are added at the beginning of the process, (b) conversion costs are recorded, and (c) units are transferred to the Assembly Department.

(a)	Work in Process-Molding
	Materials Inventory
(b)	Work in Process-Molding
	Conversion Costs-Control
(c)	Work in Process-Assembly
	Work in Process-Molding

Feedback

3. Repeat Requirements 1 and 2 for the Assembly Department.

a. A physical flow schedule

Muskoge Company
Assembly Department
Physical Flow Schedule
Units to account for:
Units, beginning work in process
Units started in February (transferred in)
Total units to account for
Units accounted for:
Units completed and transferred out:
Started and completed
From beginning work in process
Units, ending work in process
Total units accounted for

Feedback

b. An equivalent units calculation

	Total Equivalent Units
Direct Materials
Conversion Costs
Transferred In

c. Calculation of unit costs. If required, round your intermediate computations and final answer to four decimal places and use the rounded answer in subsequent computations.
$ per unit

d. Compute the following. For interim computations, carry amounts out to four decimal places. Round your final answers to the nearest dollar.

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

e. A cost reconciliation. When necessary, round equivalent cost per unit to four decimal places, and round all other amounts to the nearest dollar.

Costs to account for:
Beginning work in process	$
Costs incurred
Total costs to account for	$

Costs accounted for:
Transferred out	$
Ending work in process
Total costs accounted for	$

Note: Cost reconciliation totals differ by $1 due to rounding error.

Feedback

Prepare journal entries that show the flow of manufacturing costs for the Assembly Department. (a) Materials are added at the end of the process, (b) conversion costs are recorded, and (c) the units are transferred to Finished Goods.

(a)	Work in Process-Assembly
	Materials Inventory
(b)	Work in Process-Assembly
	Conversion Costs-Control
(c)	Finished Goods
	Work in Process-Assembly Correct

Answer 1

a. A physical flow schedule:
Muskoge Company
Molding Department
Physical Flow Schedule
Units to account for:
Units in beginning work in process	10,000
Units transferred in February (transferred in)	25,000
Total units to account for	35,000
Units accounted for:
Units completed and transferred out
Started and completed	20,000
From beginning work in process	10,000
Units, ending work in process	5,000
Total units accounted for	35,000

b. An equivalent units calculation

	Total Equivalent Units
Direct Materials	25,000
Conversion Costs	30,0000

W.N

		Equivalent units
	Physical units	Material		Conversion
		% completion	Units	% completion	Units
Beginning work in process	10,000	0	0	60%	6,000
Units started and completed	20,000	100%	20,000	100%	20,000
Units transferred out	30,000
Ending work in process	5,000	100%	5,000	80%	4,000
Total	35,000		25,000		30,000

C. Cost per equivalent units:

Material cost per unit = $56,250 / 25,000 = $2.25

Conversion cost per unit = $106,500 / 30,000 = $3.55

d.
Cost of ending work in process:
Direct material (5,000*2.25)	$ 11,250
Conversion cost (4,000*3.55)	$ 14,200
	$ 25,450
Cost of goods transferred out:
Beginning work in process:
Beginning balance	$ 35,800
Further cost incurred	$ 21,300
Total cost of beginning work in process		$ 57,100
Started and completed:
Direct material (20000*2.25)	$    45,000
Conversion cost (20000*3.55)	$    71,000
Total cost of units started and completed		$ 116,000
Total cost of goods transferred out		$ 173,100

e. Cost reconciliation:
Cost to account for:
Beginning work in process	$    35,800
Cost incurred	$ 162,750
Total cost to account for	$ 198,550
Cost accounted for:
Transferred out	$ 173,100
Ending work in process	$    25,450
Total cost accounted for	$ 198,550