Process Costing: One Process and Two Time Periods-FIFO Costing Method
Wash Clean Laboratories produces biodegradable liquid detergents that leave no soap film. The production process has been automated, so the product can now be produced in one operation instead of in a series of heating, mixing, and cooling operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. Operating data for July and August are as follows:
|
July
|
August
|
|
Beginning work in process inventory
|
|
|
|
Units (pounds)
|
2,300
|
3,050
|
|
Direct materials
|
$ 4,699
|
?*
|
|
Conversion costs
|
$ 1,219
|
?*
|
|
Production during the period
|
|
|
|
Units started (pounds)
|
31,500
|
32,800
|
|
Direct materials
|
$65,520
|
$66,912
|
|
Conversion costs
|
$54,213
|
$54,774
|
|
Ending work in process inventory
|
|
|
|
Units (pounds)
|
3,050
|
3,600
|
The beginning work in process inventory was 30 percent complete for conversion costs. The ending work in process inventory for July was 60 percent complete; for August, it was 50 percent complete. Assume that the loss from spoilage and evaporation was negligible.
Required
1. Using the FIFO costing method, prepare a process cost report for July.
2. From the information in the process cost report, identify the amount that should be transferred out of the Work in Process Inventory account, and state where those dollars should be transferred.
3. Repeat requirements 1 and 2 for August.