Oat Company manufactures oatmeal for breakfast cereal. Direct materials are adde

Question

Oat Company manufactures oatmeal for breakfast cereal. Direct materials are added at the beginning of the manufacturing process and conversion costs are incurred evenly throughout the manufacturing process. Data for the most recent period are as follows:

Work in process, January 31 — 65,000 units 40% completed for conversion costs

Units started during February, 475,000

Work in process, February 28 — 40,000 units

20% completed for conversion costs

Costs for February:

Direct materials Beginning WIP $184,000 Added $ 950,000

Conversion costs Beginning WIP $139,200 Added $1,638,800

Calculate Oatmeal Company’s physical flow of units, equivalent units, cost per equivalent unit and assign costs to Finished Goods and Ending Work-in-Process Inventories using the FIFO method of processing costing.

Explanation / Answer

Calculate physical flow of units :

Calculate equivalent unit :

Calculate cost per equivalent unit :

Calculate assign cost :

Cost of finished goods = (435000*2+474000*3.4)+(184000+139200) = 2804800

Ending work in process = (40000*2+8000*3.4) = 107200

Physical units Physical units Beginning units 65000 Unit completed 500000 Unit started 475000 Ending units 40000 Total units 540000 Total units 540000

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