Lexington Company produced baseball bats and cricket paddles. It has two departm

Question

Lexington Company produced baseball bats and cricket paddles. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department as 40% complete. Direct materials are added at the beginning of the process.

Beginning work in process in the finishing department was 80% complete as to conversion. Trans-in is added at the beginning. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows:

Cutting:
Beginning work in process units 20,000
Units started this period 60,000
Units transferred this period 64,000
Ending work-in-process units -

Finishing:
Beginning work in process units 24,000
Units started this period ?
Units transferred this period 68,000
Ending work-in-process units 20,000

Material costs added $48,000 cutting $34,000 finishing
Conversion costs $28,000 cutting $68,500 finishing
Transferred-out cost $128,000 cutting ? finishing

1) Prepare a production cost worksheet, using FIFO for the finishing department up to cost per equilivant units.

2) Prepare the computation to assign cost to transferred-out and the respective journal entry.

Explanation / Answer

1) A production cost worksheet, using FIFO for the finishing department up to cost per equilivant units:

2) Total costs assigned to tranferred out to Finished Goods = $218320

Journal Entry:

Debit Finished Goods $218320

Credit Work in Process $218320

(being finished goods transferred to Finished Goods Inventory from Work in Process Inventory)

====================================================

Physical units Materials costs Conversion costs Total Begining WIP 24000 - 4800 (20%) Units started and completed 44000 44000 44000 Units transferred out 68000 Ending WIP 20000 20000 6000 Equivalent units 64000 54800 costs: transferred out (from cutting) 128000 - added during period 34000 68500 Total costs 162000 68500 Cost per equivalent units $2.53 $1.25 cost of tranferred out to Finished Goods: cost of beginning WIP 24000 28000 $52000 cost of units started and completed 44000*2.53 44000*1.25 $166320 Total costs assigned to tranferred out to Finished Goods $218320

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