At the beginning of 2012, the management of Patrick’s Practice Sets has decided to begin a small manufacturing process that will print the practice sets and then bind them. The manufacturing process begins with the printing of the practice sets. The practice sets are then collated and bound. After they are inspected, they are transferred to finished goods. This is a process costs system and the company elects to use the FIFIO method of accounting for product costs. Assume there are no significant material or labor variances.

DIrect materials

Paper is added 100% at the beginning of the process

Binding is added 100% as the last step in the manufacturing process

Conversion costs

Direct labor and factory overhead are added equally throughout the process

At the beginning of the accounting period, it is estimated that production will be 60,000 practice sets. Estimated factory overhead for the period is $30,000. This information is to be used to determine rate for the factory overhead.

Direct materials

Purchase of paper 12,000 reams @ $3.00 a ream

Each ream contains 500 sheets of paper and each practice set contains 100 sheets of paper.

The company starts printing of 55,000 practice sets

Purchase of 60,000 units of binding @ $.15

Used 46,000 units of bindings this period

Estimated and actual direct labor costs totaled $96,500

Actual factory overhead costs totaled $27,000

Ending work in process is 100% complete as to paper

25% complete as to conversion costs

0% complete as to binding

The finished good inventory at January 1, 2012 had a balance of 30,000 practice sets and at December 31, 2012 had an ending balance of 40,000 practice sets.

The selling price of each practice set is $10.00

Assume all material purchases and sales were made on account.

Assume all other transactions were on the cash basis

Operating expense this period totaled $80,000

1. Prepare an equivalent units schedule. The schedule should have a minimum of the following information. (XXX represents a number)

Whole Units Direct Materials Direct Materials Conversion Costs

Paper Binding




2. Calculate the cost per equivalent unit for the direct materials (paper) direct materials (bindings) and conversion costs. (Do not round your numbers)

3. Prepare a cost production report using FIFO costing.