Question

FIFO Method, Equivalent Units, Unit Cost, Multiple Departments

Fordman Company has a product that passes through two processes: Grinding and Polishing. During December, the Grinding Department transferred 20,000 units to the Polishing Department. The cost of the units transferred into the second department was $40,000. Direct materials are added uniformly in the second process. Units are measured the same way in both departments.

The second department (Polishing) had the following physical flow schedule for December:

Units to account for:
Units, beginning work in process	4,000	(40% complete)
Units started	?
Total units to account for	?
Units accounted for:
Units, ending work in process	8,000	(50% complete)
Units completed	?
Units accounted for	?

Costs in beginning work in process for the Polishing Department were direct materials, $5,000; conversion costs, $6,000; and transferred in, $8,000. Costs added during the month: direct materials, $32,000; conversion costs, $50,000; and transferred in, $40,000.

Assume the company uses the FIFO method.

Required:

1-a. Prepare a schedule of equivalent units. Enter percentages as whole numbers.

Fordman Company
Schedule of Equivalent Units
For the month of December

	Direct Materials	Conversion Costs	Transferred In
Units to complete in BWIP:
x %
Units in EWIP:
x %
x %

1-b. Compute the unit cost for the month of December. Round intermediate calculations and your final answer to the nearest cent.
$ per equivalent unit

Answer 1

Units to account for:
Units, beginning work in process	4000	(40% complete)
Units started	20000
Total units to account for	24000
Units accounted for:
Units, ending work in process	8000	(50% complete)
Units completed	16000
Units accounted for	24000

1-a.

Fordman Company
Schedule of Equivalent Units
For the month of December
	Direct Materials	Conversion Costs	Transferred In
Units started and completed	12000	12000	12000
Units to complete in BWIP:
4000 x 60%	2400	2400
Units in EWIP:
8000 x 50%	4000	4000
8000 x 100%			8000
Total equivalent units	18400	18400	20000

1-b. $6.46 per equivalent unit

	Direct Materials	Conversion Costs	Transferred In	Total
Costs added during December	32000	50000	40000
Equivalent units	18400	18400	20000
Cost per equivalent unit $	1.74	2.72	2.00	6.46