Question

Problem 16-5AA FIFO: Process cost summary; equivalent units; cost estimates LO C3, C4, P4

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Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 23,700 units of product to finished goods inventory. Its 3,300 units of beginning work in process consisted of $93,945 of direct materials and $457,446 of conversion costs. It has 2,550 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $525,555 of direct material costs and $2,605,614 of conversion costs were charged to production.

Beginning work in process consisted of 3,300 units that were 100% complete with respect to direct materials and 40% complete with respect to conversion.

Of the 23,700 units completed, 3,300 were from beginning work in process. The remaining 20,400 were units started and completed during May.

Assume that Tamar uses the FIFO method to account for its process costing system.

Problem 16-5A Part 1

1. Prepare the company’s process cost summary for May using the FIFO method. (Round "Cost per EUP" to 2 decimal places.)

Total costs to account for: Cost of beginning work in process $551,391 Costs incurred this period 3,131,169 Total costs to account for: $3,682,560 Total costs accounted for Difference due to rounding cost/unit $0 Unit reconciliation: Units to account for: Beginning work in process inventory - units 3,300 Units started this period 22,950 Total units to account for 26,250 Total units accounted for: Units completed and transferred out 23,700 Ending work in process - units 2,550 Total units accounted for 26,250 Equivalent units of production (EUP)- FIFO method Units % Materials EUP- Materials % Conversion EUP- Conversion Beginning work in process inventory - units 3,300 0% 0 60% 1,980 Units started and completed this period 20,400 100% 20,400 100% 20,400 Ending work in process - units 2,550 100% 2,550 80% 2,040 Total units 23,700 22,950 24,420 Cost per equivalent unit of production Materials Conversion Costs incurred this period $525,555 $2,605,614 Total costs Costs $525,555 Costs $2,605,614 ÷ Equivalent units of production EUP 22,950 EUP 24,420 Cost per equivalent unit of production (rounded to 2 decimals) $22.90 $106.70 Total costs accounted for: Beginning Inventory Cost: $551,391 Cost to complete beginning inventory EUP Cost per EUP Total cost Direct materials $22.90 $0 Conversion $106.70 Total cost to complete beginning inventory Total cost of units in beginning inventory 551,391 Cost of units started and completed EUP Cost per EUP Total cost Direct materials $0.00 $0 Conversion $106.70 Total cost of units started and completed Total cost of units transferred out 551,391 Costs of ending work in process EUP Cost per EUP Total cost Direct materials $22.90 $0 Conversion $106.70 0 Total cost of ending work in process Total costs accounted for

Problem 16-5A Part 2

2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.

Answer 1

Answer 1.
Tamar Co.
Cost of Production Report
For the Month ended May 31
Particulars		Equivalent Units
	Physical Units	Materials	Conversion Costs
Units to be accounted for
Work in process - Beginning	3,300
Started into production	22,950
Total units	26,250
Units accounted for
Goods Units Completed & transferred out:
From Beginning WIP	3,300	-	1,980
(0% materials, 60% conversion costs)
Started & Completed (23,700 - 3,300)	20,400	20,400	20,400
Work in process, Ending	2,550	2,550	2,040
(100% materials, 80% conversion costs)
Equivalent units accounted for	26,250	22,950	24,420
	Materials	Conversion Costs	Total
Total Cost to Account for:
WIP, Beginning	93,945	457,446	551,391
Cost added in current period	525,555	2,605,614	3,131,169
Total cost to be account for	619,500	3,063,060	3,682,560
Cost added in current period	525,555	2,605,614	3,131,169
Equivalent Units of work done in current Period	22,950	24,420
Cost per Equivalent Unit	22.90	106.70	129.60
Assignment of Costs:
Goods Units and Completed out (23,700 Units)
WIP, Beginning -3,300 Units	-	-	551,391
Cost added to Beg. WIP in Current period	-	211,266	211,266
		(1980 Units X $106.70)
Total of Beginning Inventory	-	211,266	762,657
Started and completed - 20,400 Units	467,160	2,176,680	2,643,840
	(20,400 units X $22.90)	(20,400 units X $106.70)
Total Cost of good units completed & transferred out	467,160	2,387,946	3,406,497
WIP, Ending - 2,550 Units	58,395	217,668	276,063
	(2,550 Units X $22.90)	(2,550 Units X $106.70)
Total Cost accounted For	525,555	2,605,614	3,682,560

Answer 2.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1	Finished Goods Inventory	3,406,497
	Work in Process		3,406,497
	(record the cost of completed units)