The Martin Rubber Company produces tires. The following information is available for Martin:
Beginning work in process inventory: 2,000 tires, 100% complete for direct materials, 60% complete for conversion costs, cost of direct materials = $57,100, cost of direct labor and manufacturing overhead allocated = $19,020
Current period activity: 15,100 tires started into production, 12,600 tires completed, cost of direct materials added = $302,000, cost of direct labor and manufacturing overhead allocated = $232,980
Ending work in process inventory: 4,500 units, 100% complete for direct materials, 40% complete for conversion costs
-
Assuming Martin uses the FIFO method, the journal entry to move costs from this department's work in process to the next department includes?

Question

Quizplus · Accepted Answer

Under the FIFO method, costs are transferred out based on the costs associated with the units completed during the current period. The costs to be transferred include the costs from the beginning inventory that were necessary to complete those units and the costs added during the current period for the units started and completed. The correct entry involves debiting the next department's work in process account (Work in process-dept 2) for the total cost of the units completed during the period. The specific dollar amount isn't provided in the options, but the conceptually correct action is to debit the next department's work in process account for the cost of completed goods.

The Martin Rubber Company Produces Tires