Class Discussion Exercise

CFT Home Paint Company produces exterior latex paint, which it sells in one-gallon containers. The

company has two processing departmentsBase Fab and Finishing. White paint, which is used as a base

for all the company's paints, is mixed from raw ingredients in the Base Fab Department. Pigments are

then added to the basic white paint, the pigmented paint is squirted under pressure into one-gallon

containers, and the containers are labeled and packed for shipping in the Finishing Department.

Information relating to the company's operations for April follows:

1.

Issued raw materials for use in production: Base Fab Department, $851,000; and Finishing

Department, $629,000.

2.

Incurred direct labor costs: Base Fab Department, $330,000; and Finishing Department,

$270,000.

3.

Applied manufacturing overhead cost: Base Fab Department, $665,000; and Finishing

Department, $405,000.

4.

Transferred basic white paint from the Base Fab Department to the Finishing Department,

$1,850,000.

5.

Transferred paint that had been prepared for shipping from the Finishing Department to Finished

Goods, $3,200,000.

Required

:

1. Determine the cost of ending work in process inventories and of units transferred out of the Base Fab

Department in April. The following additional information is available regarding production in the

Base Fab Department during April:

Production data:

Units (gallons) in process, April 1: materials 100% complete;

Labor and overhead 60% complete

30,000

Units (gallons) started in production during April

420,000

Units (gallons) completed and transferred to Finishing Department

370,000

Units (gallons) in process, April 30: materials 50% complete;

Labor and overhead 25% complete

80,000

Cost data:

Work in process inventory, April 1:

Materials

$

92,000

Labor

21,000

Overhead

37,000

Total cost of work in process inventory

$

150,000

Costs added during April:

Materials

$

851,000

Labor

330,000

Overhead

665,000

Total cost added during April

$ 1,846,000

material

labor

oh

total

Ending wip inventory

Equiv. units in pro

$40,000.00

$20,000.00

$20,000.00

Cost per equiv. unit

$2.30

$0.90

$1.80

Cost of ending wip

$92,000.00

$18,000.00

$36,000.00

$146,000.00

units transferred out

transferred to next stage

$370,000.00

$370,000.00

$370,000.00

cost per equiv. unit

$2.30

$0.90

$1.80

$851,000.00

$333,000.00

$666,000.00

$1,850,000.00

2. Cost reconciliation report for the Base Fab Department for April.

Beginning Wip cost

$ 150,000

Cost incurred during period

$ 1,846,000

Total cost to be accounted for

$ 1,996,000

Costs accounted for as follows:

Cost of Units Transferred Out

$ 1,850,000

Cost of Ending Wip

$ 146,000

Total cost accounted for

$ 1,996,000

Required:Repeat requirement 1 above using a FIFO cost flow assumption for Base Fab Department.

Using the FIFO Method; What is the Cost of Units Transferred Out? What is the Cost of Ending Wip?