Mike's manufactures bikes and has two departments, production department and testing department. This problem focuses on the production department. The process-costing system at Mike's has a single direct-cost category (Direct material) and a single indirect-cost category (Conversion cost). All direct materials are added at the beginning of the process, and conversion costs are added evenly during the process. When the production department finishes work on each wheelchair, it is immediately transferred to the testing department. Data for the production department for Oct 2014 are as follows:
Physical units Direct Material Conversion Costs
Beg. WIP 5,000 units $1,250,000 $402,750
Started during Oct. 20,000 units
Completed 22,500 units
Total costs added $4,500,000 $2,337,500
Completion rates
Beg. WIP: 100% for direct materials; 60% for conversion costs
End. WIP: 100% for direct materials; 70% for conversion costs
Required)
Complete each of the following process-costing steps.
Physical flow of units
Equivalent units
Summarize costs
Determine cost per equivalent unit
Determine Cost of goods completed and WIP ending balance
Prepare journal entries to update the WIP account and record the transfer of completed goods.
Use FIFO method of process costing