Question:
1. Fino Linens Inc. manufactures bed and bath linens. The bath linens department sews terry cloth into towels of various sizes. Fino uses the weighted average method. All materials are added at the beginning of the process. The following data are for the bath linens department for August:
Production:
Units in process, August 1, 60 percent complete 20,000
Units completed and transferred out 60,000
Units in process, August 31, 60 percent complete 20,000
Costs:
WIP, August 1 $11,520
Current costs 72,000
Total $83,520
Required:
1. Prepare a physical flow analysis for the bath linens department for August.
2. Calculate equivalent units of production for the bath linens department for August.
3. Calculate the unit cost for the bath linens department for August.
4. Show that the cost per unit calculated in Requirement 3 is a weighted average of the cost per equivalent unit in BWIP and the current (FIFO) cost per equivalent unit.