Question

The Foster Company has two manufacturing departments, forming and painting. The company uses the FIFO method of process costing.   At the beginning of the month, the forming department has
3,000 units in inventory, 60% complete as to materials and 30% complete as to conversion costs.

The beginning inventory cost of $8,000 consisted of
$5,500 of direct material costs and $2,500 of conversion cost.

During the month, the forming department started 40,000 units. At the end of the month, the forming department had 4,000 units in ending inventory, 70% complete as to materials and 25% complete as to conversion.
Units completed in the forming department are transferred to the painting department.

Cost information for the forming department is as follows:   
Beginning work in process inventory $8,000   
Direct materials added during the month $160,000
Conversion added during the month $101,660    

Assume that Foster uses the FIFO method of process costing. Complete the Forming Department cost report for:
1. Calculating the equivalent units of production.  
2. Calculating the costs per equivalent unit of production. (Round your answer to 2 decimal places.)
3. Showing the cost reconciliation.

Answer 1

Forming department physical units are completed below

Particulars	units
Beginning work in process inventory	3,000
Units started into production	40,000
Total units to be accounted	43,000
Units completed and transferred out	39,000
Ending work in process	4,000
Total units to be accounted	43,000

3,000 units complete from beginning work in process inventory and another 36,000 units are completed.

1 Equivalent unit of material

   = (3,000 × 40%) + 36,000 + (4,000 × 70%) = 40,000 units

Equivalent unit of conversion

= (3,000 × 70%) + 36,000 + (4,000 × 25%) = 39,100 units

Equivalent unit of material is 40,000 unit and conversion cost is 39,100 units.

2 Cost per equivalent unit of material

= 160,000 / 40,000 = $4

Cost per equivalent unit of conversion cost

= 101,660 / 39,100 = $2.6

Cost per equivalent unit of material is $4 and cost per equivalent unit of conversion cost is $2.6

3 units completed in beginning work in process of material

= 3,000 × 40% = 1,200 units

Units completed in beginning work in process of conversion

= 3,000 × 70% = 2,100

COST OF UNITS TRANSFERRED OUT

= 5,500 + 2,500 + (1,200 ×4) + (2,100 × 2.6) + (36,000 × 4) + (36,000 × 2.6) = $255,860

Ending inventory units completed in material

= 4,000 × 70% = 2,800 units

Ending inventory unit completed in conversion cost

= 4,000 × 25% = 1,000 unit

Cost of ending inventory

= (2,800 × 4) + (1,000 × 2.6) = $13,800

Cost reconciliation

Particulars	$
Cost of beginning work in process	8,000
Cost added during the period (8,000 + 261,660)	261,660
Total cost to be accounted	269,660
Cost assigned to units completed and transferred out	255,860
Cost assigned to ending work in process	13,800
Total cost to be accounted	269,660

Cost of unit transferred out is $269,660 , it includes the cost of beginning work in process.

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