Question

Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 28,200 units of product to finished goods inventory. Its 4,200 units of beginning work in process consisted of $73,980 of direct materials and $1,308,684 of conversion costs. It has 3,000 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $656,100 of direct material costs and $2,669,316 of conversion costs were charged to production.

• Beginning work in process consisted of 4,200 units that were 100% complete with respect to direct materials and 40% complete with respect to conversion.
• Of the 28,200 units completed, 4,200 were from beginning work in process. The remaining 24,000 were units started and completed during May.

Assume that Tamar uses the FIFO method to account for its process costing system.

2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.

Answer 1

Equivalent unit of material = (4200*0%+24000+3000*100%) = 27000

Equivalent unit of conversion = (4200*60%+24000+3000*80%) = 28920

Cost per equivalent unit of material = 656100/27000 = 24.3

Cost per equivalent unit of conversion = 2669316/28920 = 92.3

Cost of unit transferred out = (24000*24.3+26520*92.30+73980+1308684) = 4413660

Journal entry

Date	account and explanation	Debit	Credit
May 31	Finished goods	4413660
	Work in process		4413660
	(To record goods completed)