Prepare a physical flow schedule for May (Step 1). 2. Prepare an equivalent units schedule for May using the FIFO method (Step 2). 3. What if 80 percent of the materials were added at the beginning of the process and  20 percent were added at the end of the process (assume the same type of materials)?

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EXAMPLE 6.

The HOW and WHY of Physical Flow Analysis and Equivalent Units: FIFO Metho

Information: The production of Bienestar's antihistamine product begins in the Blending Department. All materials are added at the beginning of the blending process. Output is measured in ounces. The production data for May are as follows: 

Production: 

Units in process, May 1, 70% complete* Units completed and transferred out 

Units in process, May 31, 40% complete* *With respect to conversion costs

15,000 90,000 30,000 

Why

The physical flow schedule traces the units in process regardless of their stage of completion and provides the information needed for preparing the equivalent units schedule. FIFO uses only current output to calculate the current-period unit cost. Thus, FIFO treats the work (equivalent output) in BWIP as belonging to the prior period and only counts the work (equivalent output for each input) done this period as part of this period's output. 

Required: 1. Prepare a physical flow schedule for May (Step 1). 2. Prepare an equivalent units schedule for May using the FIFO method (Step 2). 3. What if 80 percent of the materials were added at the beginning of the process and 

20 percent were added at the end of the process (assume the same type of materials)? 

How many equivalent units of materials would there be? Solution: 1. First, two calculations are needed: 

Units started and completed = Units completed – Units, BWIP 

= 90,000 – 15,000 = 75,000 Units started = Units started and completed + Units, EWIP 

= 75,000 + 30,000 = 105,000 

Chapter 6 

Process Costing 

279 

EXAMPLE 6.

(Continued

15,000 105,000 120,000 

Step 1: Physical Flow Schedule: Blending Department Units to account for: 

Units, beginning work in process (70% complete) Units started during May 

Total units to account for Units accounted for: 

Units completed and transferred out: 

Started and completed 

75,000 From beginning work in process 

15,000 Units in ending work in process (40% complete) Total units accounted for 

90,000 30,000 120,000 

Step 2: Equivalent Units Schedule: Blending Department 

Direct Conversio

Materials Costs Units started and completed 

75,000 75,000 Add: Units in beginning work in process X 

Percentage complete: 15,000 X 0% direct materials 15,000 X 30% conversion costs 

4,500 Add: Units in ending work in process X 

Percentage complete: 30,000 X 100% direct materials 

30,000 30,000 X 40% conversion costs 

12,000 Equivalent units of output 

105,000 91,500 3. Equivalent units of materials = 75,000 + (0.20 X 15,000) + (0.80 X 30,000) = 

102,000 

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