FIFO Method, Valuation of Goods Transferred Out and Ending Work in Process McCourt Company uses the FIFO method to account for the costs of production. For the first processing department, the following equivalent units schedule has been prepared: Direct Materials Conversion Costs Units started and completed 14,000 14,000 Units, beginning work in process: 5,000 × 0% — — 5,000 × 40% — 2,000 Units, ending work in process: 3,000 × 100% 3,000 — 3,000 × 75% — 2,250 Equivalent units of output 17,000 18,250 The cost per equivalent unit for the period was as follows: Direct materials $4.00 Conversion costs 12.00 Total $16.00 The cost of beginning work in process was direct materials, $80,000; conversion costs, $60,000. Required: Question Content Area 1. Determine the cost of ending work in process. Determine the cost of goods transferred out. Question Content Area 2. Prepare a physical flow schedule
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
FIFO Method, Valuation of Goods Transferred Out and Ending Work in Process
McCourt Company uses the FIFO method to account for the costs of production. For the first processing department, the following equivalent units schedule has been prepared:
| Direct Materials | Conversion Costs | |||||||
| Units started and completed | 14,000 | 14,000 | ||||||
| Units, beginning work in process: | ||||||||
| 5,000 × 0% | — | — | ||||||
| 5,000 × 40% | — | 2,000 | ||||||
| Units, ending work in process: | ||||||||
| 3,000 × 100% | 3,000 | — | ||||||
| 3,000 × 75% | — | 2,250 | ||||||
| Equivalent units of output | 17,000 | 18,250 |
The cost per equivalent unit for the period was as follows:
| Direct materials | $4.00 | |
| Conversion costs | 12.00 | |
| Total | $16.00 |
The cost of beginning work in process was direct materials, $80,000; conversion costs, $60,000.
Required:
Question Content Area
1. Determine the cost of ending work in process.
Determine the cost of goods transferred out.
Question Content Area
2. Prepare a physical flow schedule
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