Chapter 6, Problem 68P

(Appendix 6A) First-In, First-Out Method

Refer to Problem 6-67.

Required:

Prepare a production report for the mixing and encapsulating departments using the FIFO method. (Note: Round the unit cost to four decimal places.) (Hint: For the second department, you must convert gallons to capsules.)

To determine

Make production report of Company BP by applying FIFO method.

Explanation of Solution

Production Report:

The document comprises all the activities of process department related to manufacturing which occurs; in a particular period of time is called production report. It helps to identify the efficiency of process department.

Prepare production report of company M as shown below:

Company BP
Mixing Department
Production Report for March Month
FIFO Method
Unit Information
Physical Flow:
Units to accounts for:	Units		Units to accounted for:		Units
Units in BWIP	10		Unit started and completed		130
Units started	150		From BWIP		10
			Units in EWIP		20
Total units to account for	160		Total units accounted for		160
Equivalent Units
Started and completed					130
To complete BWIP $\left(\text{10 gallons}\times 0.60\right)$					6
Units in EWIP $\left(20\text{ gallons}\times 0.50\right)$					10
Total equivalent units					146
Cost Information
Cost to account for:		Material (In$)		Conversion (In$)	Total (In$)
Cost in BWIP		252		846	1,098
Cost added by department		3,636		13,854	17,490
Total cost to account for:		3,888		14,700	18,588
Cost per equivalent unit					$119.7945
Costs to account for:		Transferred out (In $)		EWIP (In $)	Total (In $)
Transferred out:
Units started and completed $\left(130\text{ gallons}\times \$119.45\right)$		15,573			15573
Units in BWIP:
From prior period		1,098			1,098
From current period $\left(6\text{ gallons}\times \$119.7495\right)$		719			719
Goods in EWIP $\left(10\text{ units}\times \$119.7495\right)$				1198	1198
Total cost accounted for:		17,390		1,198	18,588

Table (1)

Therefore, cost per equivalent unit, equivalent units and total cost are $119.7495, 146 gallons and $18,588 respectively.

Prepare production report of company BP as shown below:

Company BP
Encapsulating Department
Production Report for March Month
FIFO Method
Unit Information
Physical Flow:
Units to accounts for:		Units			Units to accounted for:			Units
Units in BWIP		4,000			Unit started and completed			204,000
Units started		210,000			From BWIP			4,000
					Units in EWIP			6,000
Total units to account for		214,000			Total units accounted for			214,000
Equivalent Units			Transferred-in			Material		Conversion
Started and completed			204,000			204,000		204,000
To complete BWIP			_			_		2000
Units in EWIP			6,000			6,000		2,400
Total equivalent units			210,000			210,000		208,400
Cost Information
Cost to account for:	Transferred-in			Material (In$)			Conversion (In$)	Total (In$)
Cost in BWIP	140			32			50	222
Cost added by department	15,390			1,573			4,860	23,823
Total cost to account for:	17,530			1,605			4,910	24,045
Cost per equivalent unit	$0.0828			$0.0075			0.233	0.1136
Costs to account for:				Transferred out (In $)			EWIP (In $)	Total (In $)
Transferred out:
Units started and completed $\left(204,000\text{ capsules }\times \$0.1136\right)$				23,174				23,174
Units in BWIP:
From prior period				222			_	222
From current period $\left(\text{2000 capsules}\times \$0.0233\right)$				47			_	47
Goods in EWIP:
Transferred-in $\left(6,000\text{ capsules}\times \text{\$0}\text{.0828}\right)$				_			497	497
Material $\left(6,000\text{ capsule}\times \$0.0075\right)$				_			45	45
Conversion $\left(2400\text{ capsule}\times \text{\$0}\text{.0233}\right)$				_			56	56
Total cost accounted for:				23,443			598	24,041

Table (2)

Therefore, cost per equivalent unit, equivalent units and total cost are $0.1136, 628,400 capsules and $24,041 respectively.

Notes:

1. Use this formula to calculate cost per equivalent unit:

$\begin{array}{c}\text{Cost per equivalent unit}=\frac{\text{Cost added during the month}}{\text{Equivalent units}}\\ \end{array}$

2. In table to calculate cost of unit started and completed multiply the unit started and completed and unit cost as shown in table.

3. In table to calculate cost of goods in EWIP, multiply units in EWIP and unit cost as shown in table.