FIFO Method, Physical Flow, Equivalent Units, Unit Costs, Cost Assignment Swasey

Question

FIFO Method, Physical Flow, Equivalent Units, Unit Costs, Cost Assignment

Swasey Fabrication, Inc., manufactures frames for bicycles. Each frame passes through three processes: Cutting, Welding, and Painting. In September, the Cutting Department of the Tulsa, Oklahoma, plant reported the following data:

In Cutting, all direct materials are added at the beginning of the process.

Beginning work in process consisted of 40,500 units, 20 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $1,215,000; direct labor, $222,600; and applied overhead, $150,000.

Costs added to production during the month were direct materials, $2,565,000; direct labor, $3,471,150. Overhead was assigned using the following information:

At the end of the month, 121,500 units were transferred out to Welding, leaving 13,500 units in ending work in process, or 25 percent complete.

Assume that the FIFO method is used.

1. Prepare a physical flow schedule.

2. Calculate equivalent units of production for direct materials and conversion costs.

3. Compute unit cost. Round your intermediate calculations and final answer to the nearest dollar.

Explanation / Answer

1 Physical Flow Opening Work In process                   40,500 Closing Work in process                   13,500 Units transferred                 121,500 Additional units transferred                   94,500 (units transferred +closing-opening) 2 Equivalent units for production equivalent units of production for materials and for conversion costs. Material Conversion Cost                                                                   135,000                 124,875 Material Cost (121500+13500) Conversion Cost (121500+13500*25%) 3 Unit Cost Opning material Cost              1,215,000 Add during The period              2,565,000 Total Material cost              3,780,000 Material cost per unit (3780000/135000) 28 Conversion Cost Opening Labour Cost                 222,600 Overhead                 150,000 Add : During the period Labour Cost              3,471,150 Overhead              2,400,000 Total Conversion Cost              6,243,750 Conversion Cost Per unit (6243750/124875) 50 Total Cost per unit (28+50) 78 Cost units transferred Out (121500*78)              9,477,000 Cost of unit in process (13500*28+13500*50*25%)                 546,750

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