A company employs a process costing for its two-department manufacturing operation using the first-in, first-ount (FIFO) inventory
Question:
A company employs a process costing for its two-department manufacturing operation using the first-in, first-ount (FIFO) inventory method. When units are completed in Department 1, they are transferred to Department 2 for completion. Inspection takes place in Department 2 immediately before the direct materials are added, when the process is 70% complete with respect to conversion. The specific identification method is used to account for lost units. The number of defective units (that is, those failing inspection) is usually below the normal tolerance limit of 4% of units inspected. Defective units have minimal value, and the company sells them without any further processing for whatever it can. Generally, the amount of collected equals, or slightly exceeds, the transportation cost. A summary of the manufacturing activity for Department 2, in units for the current month, is presented below:
Physical Units
Beginning inventory (60% complete with respect to conversion) 20,000
Units transferred in from Department 1 180,000
Units completed in Department 2 during the month 170,000
Units found to be defective at inspection 5,000
Ending inventory (80% complete with respect to conversion) 25,000
- The equivalent units for direct materials for the current month would be?
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello