QualCo manufactures a single product in two departments: Cutting and Assembly. During May, the Cutting department completed a number of units of a product and transferred them to Assembly. Of these transferred units, 37,500 were in process in the Cutting department at the beginning of May and 150,000 were started and completed in May. May’s Cutting department beginning inventory units were 60% complete with respect to materials and 40% complete with respect to conversion. At the end of May, 51,250 additional units were in process in the Cutting department and were 60% complete with respect to materials and 20% complete with respect to conversion. The Cutting department had $505,035 of direct materials and $396,568 of conversion cost charged to it during May. Its beginning inventory included $74,075 of direct materials cost and $28,493 of conversion cost. 2-4. Using the FIFO method, assign May’s costs to the units transferred out and assign costs to its ending work in process inventory. (Round "Cost per EUP" to 2 decimal places.)
QualCo manufactures a single product in two departments: Cutting and Assembly. During May, the Cutting department completed a number of units of a product and transferred them to Assembly. Of these transferred units, 37,500 were in process in the Cutting department at the beginning of May and 150,000 were started and completed in May. May’s Cutting department beginning inventory units were 60% complete with respect to materials and 40% complete with respect to conversion. At the end of May, 51,250 additional units were in process in the Cutting department and were 60% complete with respect to materials and 20% complete with respect to conversion. The Cutting department had $505,035 of direct materials and $396,568 of conversion cost charged to it during May. Its beginning inventory included $74,075 of direct materials cost and $28,493 of conversion cost.
2-4. Using the FIFO method, assign May’s costs to the units transferred out and assign costs to its ending work in process inventory. (Round "Cost per EUP" to 2 decimal places.)
Process costing: It is a type of costing method, where the direct costs are accumulated and indirect costs are allocated to products manufactured in bulk quantity. This method is used where the products are manufactured under the various processes and in large batches.
Equivalent units: These are semi completed units which were expressed as fully completed units. For instance, 1,000 units which were 50% complete were as good as 500 units 100% complete. Here, 500 units were equivalent units.
Direct materials: It is the basic input required to manufacture the finished products. The direct/raw materials are processed by incurring conversion costs and other overhead to convert them into finished products.
Direct labor: It is the cost of salaries and wages incurred directly to produce a product. This cost is incurred to convert the raw materials into finished product.
FIFO method: Under this method, the units of beginning work-in process are taken as part of units completed and transferred out. Only the costs incurred during the process are taken for calculating the equivalent units.
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