Question

Lexington Company produces baseball bats and cricket paddles. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 80% complete as to conversion. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows: Cutting Finishing Beginning work-in-process units 20,000 24,000 Units started this period 60,000 Units transferred this period 64,000 68,000 Ending work-in-process units 20,000 Material costs added $48,000 $34,000 Conversion costs 28,000 68,500 Transferred-out cost 128,000 Using FIFO costing method for the finishing department answer the following questions. 1. What are equivalent units for conversion costs? 2. What are equivalent units for trans-in costs? 3. What is equivalent unit costs for direct materials? 4. What is equivalent unit costs for trans-in costs? 5. What is total costs assigned to transferred out units?

Answer 1

Solutions:
	FIFO Method
Flow of Production	Physical Units	Direct Materials	Conversion	Trans-In
Work in process, beginning	24,000
Started during period	64,000
To account	88,000
Good units completed
Beginning work in process	24,000	24,000	4,800
Started and completed	44,000	44,000	44,000	44,000
Ending work in process	20,000	0	6,000	20,000
Accounted	88,000	68,000	54,800	64,000
Cost	Totals	Direct Materials	Conversion	Trans-In
WIP, beginning	52,000.00
Costs added during period	230,500	34,000.00	68,500.00	128,000.00
Total costs to account for	282,500.00	34,000.00	68,500.00	128,000.00
Divided by equivalent units		68,000	54,800	64,000
Equivalent-unit costs	3.75	0.50	1.25	2.00
Assignment of cost
Work in process, beginning		52,000.00
Completion of beginning:
Direct Materials (24,000 x 0.50)	12,000.00
Conversion (4,800 x 1.25)	6,000.00	18,000.00
Total Beginning Inventory		70,000.00
Started and Completed (44,000 x 3.75)		165,000.00
Total costs transferred out		235,000.00
Work in process ending:
Transferred-in (20,000 x 2.00)	40,000.00
Conversion (20,000 x 1.25 x 0.30)	7,500.00	47,500.00
Costs accounted		282,500.00