Cost Accounting Ch 17 Solutions
January 19, 2017 | Author: bdameron | Category: N/A
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CHAPTER 17 PROCESS COSTING 171 Industries using process costing in their manufacturing area include chemical processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips, beverages, and breakfast cereals. 172 Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added at one point in time, often the start or the end of the process, and all conversion costs are added at about the same time, but in a pattern different from direct materials costs. 173 Equivalent units is a derived amount of output units that takes the quantity of each input (factor of production) in units completed or in incomplete units in work in process, and converts the quantity of input into the amount of completed output units that could be made with that quantity of input. Each equivalent unit is comprised of the physical quantities of direct materials or conversion costs inputs necessary to produce output of one fully completed unit. Equivalent unit measures are necessary since all physical units are not completed to the same extent at the same time. 174 The accuracy of the estimates of completion depends on the care and skill of the estimator and the nature of the process. Semiconductor chips may differ substantially in the finishing necessary to obtain a final product. The amount of work necessary to finish a product may not always be easy to ascertain in advance. 175 The five key steps in process costing follow: Step 1: Summarize the flow of physical units of output. Step 2: Compute output in terms of equivalent units. Step 3: Summarize total costs to account for. Step 4: Compute cost per equivalent unit. Step 5: Assign total costs to units completed and to units in ending work in process. 176 Three inventory methods associated with process costing are: · Weighted average. · Firstin, firstout. · Standard costing. 177 The weightedaverage processcosting method calculates the equivalentunit cost of all the work done to date (regardless of the accounting period in which it was done), assigns this cost to equivalent units completed and transferred out of the process, and to equivalent units in ending workinprocess inventory.
171
178 FIFO computations are distinctive because they assign the cost of the previous accounting period’s equivalent units in beginning workinprocess inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending workinprocess inventory. In contrast, the weightedaverage method costs units completed and transferred out and in ending work in process at the same average cost. 179 FIFO should be called a modified or departmental FIFO method because the goods transferred in during a given period usually bear a single average unit cost (rather than a distinct FIFO cost for each unit transferred in) as a matter of convenience. 1710 A major advantage of FIFO is that managers can judge the performance in the current period independently from the performance in the preceding period. 1711 The journal entries in process costing are basically similar to those made in jobcosting systems. The main difference is that, in process costing, there is often more than one workin process account––one for each process. 1712 Standardcost procedures are particularly appropriate to processcosting systems where there are various combinations of materials and operations used to make a wide variety of similar products as in the textiles, paints, and ceramics industries. Standardcost procedures also avoid the intricacies involved in detailed tracking with weightedaverage or FIFO methods when there are frequent price variations over time. 1713 There are two reasons why the accountant should distinguish between transferredin costs and additional direct materials costs for a particular department: (a) All direct materials may not be added at the beginning of the department process. (b) The control methods and responsibilities may be different for transferredin items and materials added in the department. 1714 No. Transferredin costs or previous department costs are costs incurred in a previous department that have been charged to a subsequent department. These costs may be costs incurred in that previous department during this accounting period or a preceding accounting period. 1715 Materials are only one cost item. Other items (often included in a conversion costs pool) include labor, energy, and maintenance. If the costs of these items vary over time, this variability can cause a difference in cost of goods sold and inventory amounts when the weightedaverage or FIFO methods are used. A second factor is the amount of inventory on hand at the beginning or end of an accounting period. The smaller the amount of production held in beginning or ending inventory relative to the total number of units transferred out, the smaller the effect on operating income, cost of goods sold, or inventory amounts from the use of weightedaverage or FIFO methods.
172
1716 (25 min.) Equivalent units, zero beginning inventory. 1.
Direct materials cost per unit ($750,000 ÷ 10,000) Conversion cost per unit ($798,000 ÷ 10,000) Assembly Department cost per unit
$ 75.00 79.80 $154.80
2a. Solution Exhibit 1716A calculates the equivalent units of direct materials and conversion costs in the Assembly Department of Nihon, Inc. in February 2009. Solution Exhibit 1716B computes equivalent unit costs. 2b. Direct materials cost per unit Conversion cost per unit Assembly Department cost per unit
$ 75 84 $159
3. The difference in the Assembly Department cost per unit calculated in requirements 1 and 2 arises because the costs incurred in January and February are the same but fewer equivalent units of work are done in February relative to January. In January, all 10,000 units introduced are fully completed resulting in 10,000 equivalent units of work done with respect to direct materials and conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units of work is done with respect to direct materials but only 9,500 equivalent units of work is done with respect to conversion costs. The Assembly Department cost per unit is, therefore, higher. SOLUTION EXHIBIT 1716A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Assembly Department of Nihon, Inc. for February 2009.
Flow of Production Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period Work in process, ending* (given) 1,000 ´ 100%; 1,000 ´ 50% Accounted for Work done in current period
(Step 1) Physical Units 0 10,000 10,000 9,000 1,000
(Step 2) Equivalent Units Direct Conversion Materials Costs
9,000
9,000
1,000
500
10,000
9,500
10,000
* Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
173
SOLUTION EXHIBIT 1716B Compute Cost per Equivalent Unit, Assembly Department of Nihon, Inc. for February 2009.
(Step 3) Costs added during February Divide by equivalent units of work done in current period (Solution Exhibit 17l6A) Cost per equivalent unit
Total Production Costs $1,548,000
Direct Conversion Materials Costs $750,000 $798,000 ¸ 10,000 $ 75
¸ 9,500 $ 84
1717 (20 min.) Journal entries (continuation of 1716). 1.
2.
3.
Work in Process––Assembly Accounts Payable To record $750,000 of direct materials purchased and used in production during February 2009 Work in Process––Assembly Various accounts To record $798,000 of conversion costs for February 2009; examples include energy, manufacturing supplies, all manufacturing labor, and plant depreciation Work in Process––Testing Work in Process––Assembly To record 9,000 units completed and transferred from Assembly to Testing during February 2009 at $159 ´ 9,000 units = $1,431,000
750,000 750,000
798,000 798,000
1,431,000 1,431,000
Postings to the Work in Process––Assembly account follow. Work in Process –– Assembly Department Beginning inventory, Feb. 1 0 3. Transferred out to 1. Direct materials 750,000 Work in Process––Testing 2. Conversion costs 798,000 Ending inventory, Feb. 28 117,000
174
1,431,000
1718 (25 min.) Zero beginning inventory, materials introduced in middle of process. 1. Solution Exhibit 1718A shows equivalent units of work done in the current period of Chemical P, 50,000; Chemical Q, 35,000; Conversion costs, 45,000. 2. Solution Exhibit 1718B summarizes the total Mixing Department costs for July 2009, calculates cost per equivalent unit of work done in the current period for Chemical P, Chemical Q, and Conversion costs, and assigns these costs to units completed (and transferred out) and to units in ending work in process. SOLUTION EXHIBIT 1718A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Mixing Department of Roary Chemicals for July 2009. (Step 1) Physical Flow of Production Units Work in process, beginning (given) 0 Started during current period (given) 50,000 To account for 50,000 Completed and transferred out during current period 35,000 Work in process, ending* (given) 15,000 15,000 ´ 100%; 15,000 ´ 0%; 15,000 ´ 66 2/3% Accounted for 50,000 Work done in current period only
(Step 2) Equivalent Units Chemical P
Chemical Q
Conversion Costs
35,000
35,000
35,000
15,000
0
10,000
50,000
35,000
45,000
* Degree of completion in this department: Chemical P, 100%; Chemical Q, 0%; conversion costs, 66 2/3%.
175
SOLUTION EXHIBIT 1718B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; Mixing Department of Roary Chemicals for July 2009. Total Production Costs (Step 3) Costs added during July Total costs to account for
$455,000 $455,000
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 17l8A) Cost per equivalent unit (Step 5) Assignment of costs: Completed and transferred out (35,000 units) Work in process, ending (15,000 units) Total costs accounted for
Chemical P
Chemical Q
Conversion Costs
$250,000 $250,000
$70,000 $70,000
$135,000 $135,000
$250,000
$70,000
$135,000
¸ 50,000 $ 5
¸35,000 $ 2
¸ 45,000 $ 3
$350,000 (35,000* ´ $5) + (35,000* ´ $2) + (35,000* ´ $3) 105,000 $455,000
(15,000 † ´ $5) + (0 † ´ $2) + (10,000 † ´ $3) $250,000 + $70,000 + $135,000
*Equivalent units completed and transferred out from Solution Exhibit 1718A, Step 2. † Equivalent units in ending work in process from Solution Exhibit 1718A, Step 2.
1719 (15 min.) Weightedaverage method, equivalent units. Under the weightedaverage method, equivalent units are calculated as the equivalent units of work done to date. Solution Exhibit 1719 shows equivalent units of work done to date for the Assembly Division of Fenton Watches, Inc., for direct materials and conversion costs. SOLUTION EXHIBIT 1719 Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009. (Step 2) (Step 1) Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process beginning (given) 80 Started during current period (given) 500 To account for 580 Completed and transferred out during current period 460 460 460 Work in process, ending* (120 ´ 60%; 120 ´ 30%) 120 72 36 Accounted for 580 ___ ___ Work done to date 532 496 * Degree of completion in this department: direct materials, 60%; conversion costs, 30%.
176
1720 (20 min.) Weightedaverage method, assigning costs (continuation of 1719). Solution Exhibit 1720 summarizes total costs to account for, calculates cost per equivalent unit of work done to date in the Assembly Division of Fenton Watches, Inc., and assigns costs to units completed and to units in ending workinprocess inventory. SOLUTION EXHIBIT 1720 Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009. Total Production Costs $ 584,400 4,612,000 $5,196,400
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1719) Cost per equivalent unit of work done to date (Step 5) Assignment of costs: Completed and transferred out (460 units) Work in process, ending (120 units) Total costs accounted for *
$4,586,200 610,200 $5,196,400
Direct Materials $ 493,360 3,220,000 $3,713,360
Conversion Costs $ 91,040 1,392,000 $1,483,040
$3,713,360
$1,483,040
¸ $
¸ $
177
496 2,990
(460* ´ $6,980) + (460* ´ $2,990) (72 † ´ $6,980) + (36 † ´ $2,990) $3,713,360 + $1,483,040
Equivalent units completed and transferred out from Solution Exhibit 1719, Step 2. Equivalent units in work in process, ending from Solution Exhibit 1719, Step 2.
†
532 6,980
1721 (15 min.) FIFO method, equivalent units. Under the FIFO method, equivalent units are calculated as the equivalent units of work done in the current period only. Solution Exhibit 1721 shows equivalent units of work done in May 2009 in the Assembly Division of Fenton Watches, Inc., for direct materials and conversion costs. SOLUTION EXHIBIT 1721 Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009.
Flow of Production Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 80 ´ (100% - 90%); 80 ´ (100% - 40%) Started and completed 380 ´ 100%, 380 ´ 100% Work in process, ending * (given) 120 ´ 60%; 120 ´ 30% Accounted for Work done in current period only §
(Step 1) Physical Units 80 500 580
(Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
80 8
48
380
380
72
36
460
464
†
380
120 ___ 580
Degree of completion in this department: direct materials, 90%; conversion costs, 40%. 460 physical units completed and transferred out minus 80 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: direct materials, 60%; conversion costs, 30%. †
178
1722 (20 min.) FIFO method, assigning costs (continuation of 1721). Solution Exhibit 1722 summarizes total costs to account for, calculates cost per equivalent unit of work done in May 2009 in the Assembly Division of Fenton Watches, Inc., and assigns total costs to units completed and to units in ending workinprocess inventory. SOLUTION EXHIBIT 1722 Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $ 584,400 4,612,000 $5,196,400
Direct Materials $ 493,360 3,220,000
Conversion Costs $ 91,040 1,392,000 $1,483,040
$3,713,360 (Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 1721) Cost per equiv. unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (460 units): Work in process, beginning (80 units) Costs added to beginning work in process in current period Total from beginning inventory Started and completed (380 units) Total costs of units completed and transferred out Work in process, ending (120 units) Total costs accounted for *
$ 584,400
$3,220,000 ¸ 460
$1,392,000 ¸ 464
$
$ 3,000
7,000
$493,360
179
$91,040
(8 * ´ $7,000) + (48 * ´ $3,000)
200,000 784,400 3,800,000
(380 † ´ $7,000) + (380 † ´ $3,000)
4,584,400 612,000 $5,196,400
(72 # ´ $7,000) + (36 # ´ $3,000) $3,713,360 + $1,483,040
Equivalent units used to complete beginning work in process from Solution Exhibit 1721, Step 2. Equivalent units started and completed from Solution Exhibit 1721, Step 2. # Equivalent units in work in process, ending from Solution Exhibit 1721, Step 2. †
+
1723 (2025 min.) Standardcosting method, assigning costs. 1. SOLUTION EXHIBIT 1723A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Standard Costing Method of Process Costing for Bucky’s Boxes for July 2010 (Step 2) Equivalent Units Direct Conversion Materials Costs 185,000 (work done before current period) (Step 1) Physical Units
Flow of Production
Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 185,000 ´ (100% - 100%); 185,000 ´ (100% – 25%) Started and completed 327,000 ´ 100%, 327,000 ´ 100% Work in process, ending* (given) 138,000 ´ 100%; 138,000 ´ 80% Accounted for Work done in current period only §
465,000 650,000 185,000 0
138,750
327,000
327,000
138,000 _______ 465,000
110,400 _______ 576,150
†
327,000
138,000 _______ 650,000
Degree of completion in this department: direct materials, 100%; conversion costs, 25%. 512,000 physical units completed and transferred out minus 185,000 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: direct materials, 100%; conversion costs, 80%. †
1710
2. SOLUTION EXHIBIT 1723B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; Standard Costing Method of Process Costing for Bucky’s Boxes for July 2010
(Step 3) Work in process, beginning (given) Costs added in current period at standard costs Total costs to account for
Total Production Direct Conversion Costs Materials Costs $ 337,625 $240,500 + $ 97,125 1,814,415 (465,000 ´ $1.30) + (576,150 ´ $2.10) $2,152,040 $845,000 + $1,307,040
(Step 4) Standard cost per equivalent unit (given) (Step 5) Assignment of costs at standard costs: Completed and transferred out (512,000 units): Work in process, beginning (185,000 units) $ 337,625 Costs added to beg. work in process in current period 291,375 Total from beginning inventory 629,000 Started and completed (327,000 units) 1,111,800 Total costs of units transferred out 1,740,800 Work in process, ending (138,000 units) 411,240 Total costs accounted for $2,152,040 Summary of variances for current performance: Costs added in current period at standard costs (see Step 3 above) Actual costs incurred (given) Variance
$ 1.30
Equivalent units started and completed from Solution Exhibit 1723A, Step 2.
#
Equivalent units in ending work in process from Solution Exhibit 1723A, Step 2.
1711
2.10
$240,500 + $97,125 (0* ´ $1.30) + (138,750* ´ $2.10) (327,000 † ´ $1.30) + (327,000 † ´ $2.10) (138,000 # ´ $1.30) + (110,400 # ´ $2.10) $845,000 + $1,307,040 $604,500 $1,209,915 607,500 1,207,415 $ 3,000 U $ 2,500 F
*Equivalent units to complete beginning work in process from Solution Exhibit 1723A, Step 2. †
$
1724 (25 min.) Weightedaverage method, assigning costs. 1. & 2. Solution Exhibit 1724A shows equivalent units of work done to date for Bio Doc Corporation for direct materials and conversion costs.
Solution Exhibit 1724B summarizes total costs to account for, calculates the cost per equivalent unit of work done to date for direct materials and conversion costs, and assigns these costs to units completed and transferred out and to units in ending workinprocess inventory.
SOLUTION EXHIBIT 1724A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Bio Doc Corporation for July 2008.
Flow of Production Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period Work in process, ending* (given) 20,000 ´ 100%; 20,000 ´ 50% Accounted for Work done to date
(Step 1) Physical Units 12,500 50,000 62,500 42,500 20,000
(Step 2) Equivalent Units Direct Conversion Materials Costs
42,500
42,500
20,000
10,000
62,500
52,500
62,500
* Degree of completion: direct materials, 100%; conversion costs, 50%.
1712
SOLUTION EXHIBIT 1724B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Bio Doc Corporation for July 2008. Total Production Costs $162,500 813 ,750 $976,250
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1724A) Cost per equivalent unit of work done to date (Step 5) Assignment of costs: Completed and transferred out (42,500 units) Work in process, ending (20,000 units) Total costs accounted for *Equivalent units completed and transferred out (given). † Equivalent units in ending work in process (given).
1713
$735,250 241,000 $976,250
Direct Materials $ 75,000 350,000 $425,000
Conversion Costs $ 87,500 463,750 $551,250
$425,000
$551,250
¸ 62,500 $ 6.80
¸ 52,500 $ 10.50
(42,500* ´ $6.80) + (42,500* ´ $10.50) (20,000 † ´ $6.80) + (10,000 † ´ $10.50) $425,000 + $551,250
1725 (30 min.) FIFO method, assigning costs. 1. & 2. Solution Exhibit 1725A calculates the equivalent units of work done in the current period. Solution Exhibit 1725B summarizes total costs to account for, calculates the cost per equivalent unit of work done in the current period for direct materials and conversion costs, and assigns these costs to units completed and transferred out and to units in ending workinprocess inventory. SOLUTION EXHIBIT 1725A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Bio Doc Corporation for July 2008. (Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period) 12,500
(Step 1) Physical Units
Flow of Production
Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 12,500 ´ (100% - 100%); 12,500 ´ (100% – 70%) Started and completed 30,000 ´ 100%, 30,000 ´ 100% Work in process, ending* (given) 20,000 ´ 100%; 20,000 ´ 50% Accounted for Work done in current period only §
50,000 62,500 12,500 0
3,750
30,000
30,000
20,000
10,000
50,000
43,750
†
30,000 20,000 62,500
Degree of completion in this department: direct materials, 100%; conversion costs, 70%. 42,500 physical units completed and transferred out minus 12,500 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: direct materials, 100%; conversion costs, 50%. †
1714
SOLUTION EXHIBIT 1725B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Bio Doc Corporation for July 2008.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $162,500 813,750
Direct Materials $ 75,000 350,000
Conversion Costs $ 87,500 463,750
$976,250
$425,000
$551,250
$350,000
$463,750
¸ 50,000
¸ 43,750
$
$ 10.60
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 1725A) Cost per equivalent unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (42,500 units): Work in process, beginning (12,500 units) Cost added to beginning work in process in current period Total from beginning inventory Started and completed (30,000 units) Total costs of units completed and transferred out Work in process, ending (20,000 units) Total costs accounted for
$162,500 39,750 202,250 528,000 730,250 246,000 $976,250
*Equivalent units used to complete beginning work in process from Solution Exhibit 1725A, Step 2. † Equivalent units started and completed from Solution Exhibit 1725A, Step 2. # Equivalent units in ending work in process from Solution Exhibit 1725A, Step 2.
1715
7
$75,000 + $87,500 * (0 ´ $7) + (3,750 * ´ $10.60) (30,000 † ´ $7) + (30,000 † ´ $10.60) (20,000 # ´ $7) + (10,000 # ´ $10.60) $425,000 + $551,250
1726 (30 min.) Standardcosting method, assigning costs. 1. The calculations of equivalent units for direct materials and conversion costs are identical to the calculations of equivalent units under the FIFO method. Solution Exhibit 1725A shows the equivalent unit calculations for standard costing and computes the equivalent units of work done in July 2008. Solution Exhibit 1726 uses the standard costs (direct materials, $6.60; conversion costs, $10.40) to summarize total costs to account for, and to assign these costs to units completed and transferred out and to units in ending workinprocess inventory. 2.
Solution Exhibit 1726 shows the direct materials and conversion costs variances for Direct materials Conversion costs
$20,000 U $8,750 U
SOLUTION EXHIBIT 1726 Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; Standard Costing Method of Process Costing, Bio Doc Corporation for July 2008.
(Step 3) Work in process, beginning (given) Costs added in current period at standard costs Total costs to account for (Step 4) Standard cost per equivalent unit (given) (Step 5) Assignment of costs at standard costs: Completed and transferred out (42,500 units): Work in process, beginning (12,500 units) Costs added to beg. work in process in current period Total from beginning inventory Started and completed (30,000 units) Total costs of units transferred out Work in process, ending (20,000 units) Total costs accounted for Summary of variances for current performance: Costs added in current period at standard costs (see Step 3 above) Actual costs incurred (given) Variance
Total Production Direct Conversion Costs Materials Costs $173,500 (12,500 ´ $6.60) + (8,750 ´ $10.40) 785,000 (50,000 ´ $6.60) + (43,750 ´ $10.40) $958,500 $412,500 + $546,000 $ 6.60 $173,500 39,000 212,500 510,000 722,500 236,000 $958,500
(12,500 ´ $6.60) + (8,750 ´ $10.40) (0* ´ $6.60) + (3,750* ´ $10.40) (30,000 † ´ $6.60) + (30,000 † ´ $10.40) (20,000 # ´ $6.60) + (10,000 # ´ $10.40) $412,500 + $546,000 $330,000 350,000 $ 20,000 U
*Equivalent units to complete beginning work in process from Solution Exhibit 1725A, Step 2. † Equivalent units started and completed from Solution Exhibit 1725A, Step 2. # Equivalent units in ending work in process from Solution Exhibit 1725A, Step 2.
1716
$ 10.40
$455,000 463,750 $ 8,750 U
1727 (35–40 min.) Transferredin costs, weightedaverage method. 1, 2. & 3. Solution Exhibit 1727A calculates the equivalent units of work done to date. Solution Exhibit 1727B summarizes total costs to account for, calculates the cost per equivalent unit of work done to date for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending workinprocess inventory. SOLUTION EXHIBIT 1727A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units WeightedAverage Method of Process Costing; Finishing Department of Asaya Clothing for June 2009. (Step 1) Physical Units
Flow of Production
Work in process, beginning (given) Transferred in during current period (given) To account for Completed and transferred out during current period Work in process, ending* (given) 60 ´ 100%; 60 ´ 0%; 60 ´ 75% Accounted for Work done to date
(Step 2) Equivalent Units Transferred Direct Conversion in Costs Materials Costs
75 135 210 150 60
150
150
150
60
0
45
210
150
195
210
* Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 75%.
1717
SOLUTION EXHIBIT 1727B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Finishing Department of Asaya Clothing for June 2009.
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for
(Step 4)
Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1727A) Cost per equivalent unit of work done to date
(Step 5)
a b
Assignment of costs: Completed and transferred out (150 units) Work in process, ending (60 units): Total costs accounted for
Total Production Costs $105,000 258,000 $363,000
Direct Materials $ 0 37,500 $37,500
Conversion Costs $ 30,000 78,000 $108,000
$ 217,500
$37,500
$108,000
÷ 210 $1,035.71
÷ 150 $ 250
÷ 195 $ 553.85
$275,934 (150 a ´ $1,035.71) + (150 a ´ $250) + (150 a ´ $553.85) 87,066 (60 b ´ $1,035.71) + (0 b ´ $250) + (45 b ´ $553.85) $363,000 $ 217,500 + $37,500 + $108,000
Equivalent units completed and transferred out from Sol. Exhibit 1727, step 2. Equivalent units in ending work in process from Sol. Exhibit 1727A, step 2.
1718
Transferredin Costs $ 75,000 142,500 $ 217,500
1728 (35–40 min.) Transferredin costs, FIFO method. Solution Exhibit 1728A calculates the equivalent units of work done in the current period (for transferredin costs, directmaterials, and conversion costs) to complete beginning workin process inventory, to start and complete new units, and to produce ending work in process. Solution Exhibit 1728B summarizes total costs to account for, calculates the cost per equivalent unit of work done in the current period for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work inprocess inventory. SOLUTION EXHIBIT 1728A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units FIFO Method of Process Costing; Finishing Department of Asaya Clothing for June 2009.
(Step 1)
Flow of Production Work in process, beginning (given) Transferredin during current period (given) To account for Completed and transferred out during current period: From beginning work in process a [75 ´ (100% – 100%); 75 ´ (100% – 0%); 75 ´ (100% – 60%)] Started and completed (75 ´ 100%; 75 ´ 100%; 75 ´ 100%) Work in process, ending c (given) (60 ´ 100%; 60 ´ 0%; 60 ´ 75%) Accounted for Work done in current period only
(Step 2) Equivalent Units
Physical Transferredin Direct Conversion Units Costs Materials Costs 75 (work done before current period) 135 210 75 0
75
30
75
75
75
60 ___ 135
0 ___ 150
45 ___ 150
75 b 60 ___ 210
a
Degree of completion in this department: Transferredin costs, 100%; direct materials, 0%; conversion costs, 60%.
b
150 physical units completed and transferred out minus 75 physical units completed and transferred out from beginning workinprocess inventory. Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 75%.
c
1719
SOLUTION EXHIBIT 1728B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Finishing Department of Asaya Clothing for June 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $ 90,000 246,300 $336,300
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 1728A) Cost per equivalent unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (150 units) Work in process, beginning (75 units) Costs added to beginning work in process in current period Total from beginning inventory Started and completed (75 units) Total costs of units completed and transferred out Work in process, ending (60 units): Total costs accounted for a
$ 90,000 34,350 124,350 130,416 254,766 81,534 $336,300
Transferredin Direct Materials Conversion Costs Costs $ 60,000 $ 0 $ 30,000 130,800 37,500 78,000 $190,800 $37,500 $108,000 $130,800
$37,500
$ 78,000
÷ 135 $ 968.89
÷ $
÷ $
1720
150 520
$ 60,000 $ 0 $ 30,000 (0 a ´ $968.89) + (75 a ´ $250) + (30 a ´ $520) (75 b ´ $968.89) + (75 b ´ $250) + (75 b ´ $520) (60 c ´ $968.89) + (0 c ´ $250) + (45 c ´ $520) $190,800 + $37,500 + $108,000
Equivalent units used to complete beginning work in process from Solution Exhibit 1728A, step 2. Equivalent units started and completed from Solution Exhibit 1728A, step 2. c Equivalent units in ending work in process from Solution Exhibit 1728A, step 2. b
150 250
1729 (1520 min.) Standardcosting method. 1. Since there was no additional work needed on the beginning inventory with respect to materials, the initial mulch must have been 100% complete with respect to materials. For conversion costs, the work done to complete the opening inventory was 434,250 ÷ 965,000 = 45%. Therefore, the unfinished mulch in opening inventory must have been 55% complete with respect to conversion costs. 2. It is clear that the ending WIP is also 100% complete with respect to direct materials (1,817,000 ÷ 1,817,000), and it is 60% (= 1,090,200 ÷ 1,817,000) complete with regard to conversion costs. 3. We can first obtain the total standard costs per unit. The number of units started and completed during August is 845,000, and a total cost of $6,717,750 is attached to them. The per unit standard cost is therefore ($6,717,750 ÷ 845,000) = $7.95. If x and y represent the per unit cost for direct materials and conversion costs, respectively, we therefore know that: x + y = 7.95 We also know that the ending inventory is costed at $12,192,070 and contains 1,817,000 equivalent units of materials and 1,090,200 equivalent units of conversion costs. This provides a second equation: 1,817,000 x + 1,090,200 y = 12,192,070. Solving these equations reveals that the direct materials cost per unit, x, is $4.85, while the conversion cost per unit, y, is $3.10. 4. Finally, the opening WIP contained 965,000 equivalent units of materials and (965,000 434,250) = 530,750 equivalent units of conversion costs. Applying the standard costs computed in step (3), the cost of the opening inventory must have been: 965,000 × $4.85 + 530,750 × $3.10 = $6,325,575.
1721
1730 (25 min.) Weightedaverage method. 1. Since direct materials are added at the beginning of the assembly process, the units in this department must be 100% complete with respect to direct materials. Solution Exhibit 1730A shows equivalent units of work done to date: Direct materials Conversion costs
25,000 equivalent units 24,250 equivalent units
2. & 3. Solution Exhibit 1730B summarizes the total Assembly Department costs for October 2009, calculates cost per equivalent unit of work done to date, and assigns these costs to units completed (and transferred out) and to units in ending work in process using the weighted average method. SOLUTION EXHIBIT 1730A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Assembly Department of Larsen Company, for October 2009. (Step 1)
Flow of Production Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period Work in process, ending* (given) 2,500 ´ 100%; 2,500 ´ 70% Accounted for Work done to date
Physical Units 5,000 20,000 25,000 22,500 2,500
(Step 2) Equivalent Units Direct Conversion Materials Costs
22,500
22,500
2,500
1,750
25,000
24,250
25,000
* Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
1722
SOLUTION EXHIBIT 1730B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Assembly Department of Larsen Company, for October 2009. Total Production Costs $1,652,750 6,837,500 $8,490,250
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1730A) Cost per equivalent unit of work done to date (Step 5) Assignment of costs: Completed and transferred out (22,500 units) Work in process, ending (2,500 units) Total costs accounted for
Direct Materials $1,250,000 4,500,000 $5,750,000
Conversion Costs $ 402,750 2,337,500 $2,740,250
$5,750,000
$2,740,250
¸ 25,000 $ 230
¸ 24,250 $ 113
$7,717,500 (22,500* ´ $230) + (22,500 * ´ $113) 772,750 (2,500 † ´ $230) + (1,750 † ´ $113) $8,490,250 $6,150,000 + $2,619,000
*
Equivalent units completed and transferred out from Solution Exhibit 1730A, Step 2. Equivalent units in work in process, ending from Solution Exhibit 1730A, Step 2.
†
1731 (10 min.) Journal entries (continuation of 1730). 1.
2.
3.
Work in Process––Assembly Department Accounts Payable Direct materials purchased and used in production in October.
4,500,000
Work in Process––Assembly Department Various accounts Conversion costs incurred in October.
2,337,500
4,500,000
2,337,500
Work in Process––Testing Department 7,717,500 Work in Process––Assembly Department 7,717,500 Cost of goods completed and transferred out in October from the Assembly Department to the Testing Department.
Work in Process––Assembly Department Beginning inventory, October 1 1,652,750 3. Transferred out to 1. Direct materials 4,500,000 Work in Process–Testing 2. Conversion costs 2,337,500 Ending Inventory, October 31 772,750
1723
7,717,500
1732 (20 min.) FIFO method (continuation of 1730). 1. The equivalent units of work done in the current period in the Assembly Department in October 2009 for direct materials and conversion costs are shown in Solution Exhibit 1732A. 2. The cost per equivalent unit of work done in the current period in the Assembly Department in October 2009 for direct materials and conversion costs is calculated in Solution Exhibit 1732B. 3. Solution Exhibit 1732B summarizes the total Assembly Department costs for October 2009, and assigns these costs to units completed (and transferred out) and units in ending work in process under the FIFO method. The cost per equivalent unit of beginning inventory and of work done in the current period differ:
Direct materials Conversion costs Total cost per unit
Beginning Inventory $250.00 ($1,250,000 ¸ 5,000 equiv. units) 134.25 ($ 402,750 ¸ 3,000 equiv. units) $384.25
Cost per equivalent unit (weightedaverage) Cost per equivalent unit (FIFO)
Direct Materials $230* $225**
Work Done in Current Period $225.00 110.00 $335.00 Conversion Costs $113 * $110 **
*
from Solution Exhibit 1730B from Solution Exhibit 1732B
**
The cost per equivalent unit differs between the two methods because each method uses different costs as the numerator of the calculation. FIFO uses only the costs added during the current period whereas weightedaverage uses the costs from the beginning workinprocess as well as costs added during the current period. Both methods also use different equivalent units in the denominator. The following table summarizes the costs assigned to units completed and those still in process under the weightedaverage and FIFO processcosting methods for our example. Weighted Average FIFO (Solution (Solution Exhibit 1730B) Exhibit 1732B) Difference Cost of units completed and transferred out $7,717,500 $7,735,250 + $17,750 Work in process, ending 772,750 755,000 - $17,750 Total costs accounted for $8,490,250 $8,490,250
1724
The FIFO ending inventory is lower than the weightedaverage ending inventory by $17,750. This is because FIFO assumes that all the highercost priorperiod units in work in process are the first to be completed and transferred out while ending work in process consists of only the lowercost currentperiod units. The weightedaverage method, however, smoothes out cost per equivalent unit by assuming that more of the lowercost units are completed and transferred out, while some of the highercost units in beginning work in process are placed in ending work in process. So, in this case, the weightedaverage method results in a lower cost of units completed and transferred out and a higher ending workinprocess inventory relative to the FIFO method. SOLUTION EXHIBIT 1732A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Assembly Department of Larsen Company for October 2009. (Step 1)
(Step 2) Equivalent Units Direct Conversion Materials Costs
Physical Flow of Production Units Work in process, beginning (given) 5,000 (work done before current period) Started during current period (given) 20,000 To account for 25,000 Completed and transferred out during current period: From beginning work in process § 5,000 ´ (100% - 100%); 5,000 ´ (100% - 60%) 5,000 0 2,000 Started and completed 17,500 ´100%, 17,500 ´ 100% 17,000 † 17,500 17,500 Work in process, ending* (given) 2,500 2,500 ´ 100%; 2,500 ´ 70% _____ 2,500 1,750 Accounted for 25,000 ______ Work done in current period only 20,000 21,250 §
Degree of completion in this department: direct materials, 100%; conversion costs, 60%. 22,500 physical units completed and transferred out minus 5,000 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: direct materials, 100%; conversion costs, 70%. †
1725
SOLUTION EXHIBIT 1732B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Assembly Department of Larsen Company for October 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $1,652,750 6,837,500 $8,490,250
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 1732A) Cost per equivalent unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (22,500 units): Work in process, beginning (5,000 units) Costs added to beg. work in process in current period Total from beginning inventory Started and completed (17,500 units) Total costs of units completed & transferred out Work in process, ending (2,500 units) Total costs accounted for
$1,652,750 220,000 1,872,750 5,862,500 7,735,250 755,000 $8,490,250
*Equivalent units used to complete beginning work in process from Solution Exhibit 1732A, Step 2. † Equivalent units started and completed from Solution Exhibit 1732A, Step 2. # Equivalent units in ending work in process from Solution Exhibit 1732A, Step 2.
1726
Direct Materials $1,250,000 4,500,000 $5,750,000
Conversion Costs $ 402,750 2,337,500 $2,740,250
$4,500,000
$2,337,500
¸ 20,000 $ 225
¸ $
21,250 110
$1,250,000 + $ 402,750 (0 * ´ $225) + (2,000 * ´ $110) (17,500 † ´ $225) + (17,500 † ´ $110) (2,500 # ´ $225) + (1,750 # ´ $110) $5,750,000 + $2,740,250
1733 (30 min.) Transferredin costs, weightedaverage method (related to 1730 to 1732). 1. Transferredin costs are 100% complete, and direct materials are 0% complete in both beginning and ending workinprocess inventory. The reason is that transferredin costs are always 100% complete as soon as they are transferred in from the Assembly Department to the Testing Department. Direct materials in beginning or ending work in process for the Testing Department are 0% complete because direct materials are added only when the testing process is 90% complete and the units in beginning and ending work in process are only 70% and 60% complete, respectively. 2. Solution Exhibit 1733A computes the equivalent units of work done to date in the Testing Department for transferredin costs, direct materials, and conversion costs. 3. Solution Exhibit 1733B summarizes total Testing Department costs for October 2009, calculates the cost per equivalent unit of work done to date in the Testing Department for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the weightedaverage method. 4.
Journal entries: a. Work in Process––Testing Department Work in Process––Assembly Department Cost of goods completed and transferred out during October from the Assembly Department to the Testing Department b. Finished Goods Work in Process––Testing Department Cost of goods completed and transferred out during October from the Testing Department to Finished Goods inventory
1727
7,717,500 7,717,500
23,459,600 23,459,600
SOLUTION EXHIBIT 1733A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Testing Department of Larsen Company for October 2009. (Step 1) Physical Flow of Production Units Work in process, beginning (given) 7,500 Transferred in during current period (given) 22,500 To account for 30,000 Completed and transferred out during current period 26,300 Work in process, ending* (given) 3,700 3,700 ´ 100%; 3,700 ´ 0%; 3,700 ´ 60% Accounted for 30,000 Work done to date
(Step 2) Equivalent Units Transferredin Direct Conversion Costs Materials Costs
26,300
26,300
26,300
3,700
0
2,220
30,000
26,300
28,520
* Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 60%.
1728
SOLUTION EXHIBIT 1733B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Testing Department of Larsen Company for October 2009.
(Step 3)Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $ 3,767,960 21,378,100 $25,146,060
(Step 4) Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1733A) Equivalent unit costs of work done to date (Step 5)Assignment of costs: Completed and transferred out (26,300 units) Work in process, ending (3,700 units) Total costs accounted for
$23,459,600 1,686,460 $25,146,060
*Equivalent units completed and transferred out from Solution Exhibit 1733A, Step 2. † Equivalent units in ending work in process from Solution Exhibit 1733A, Step 2.
1729
Transferred in Costs $ 2,932,500 7,717,500 $10,650,000
Direct Materials $ 0 9,704,700 $9,704,700
Conversion Costs $ 835,460 3,955,900 $4,791,360
$10,650,000
$9,704,700
$4,791,360
¸ $
¸ 26,300 $ 369
¸ 28,520 $ 168
30,000 355
(26,300 * ´ $355) + (26,300 * ´ $369) + (26,300 * ´ $168) (3,700 † ´ $355) + (0 † ´ $369) + (2,220 † ´ $168) $10,429,500 + $9,704,700 + $4,791,360
1734 (30 min.) Transferredin costs, FIFO method (continuation of 1733). 1. As explained in Problem 1733, requirement 1, transferredin costs are 100% complete and direct materials are 0% complete in both beginning and ending workinprocess inventory. 2. The equivalent units of work done in October 2009 in the Testing Department for transferredin costs, direct materials, and conversion costs are calculated in Solution Exhibit 17 34A. 3. Solution Exhibit 1734B summarizes total Testing Department costs for October 2009, calculates the cost per equivalent unit of work done in October 2009 in the Testing Department for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the FIFO method. 4.
Journal entries: a. Work in Process––Testing Department Work in Process––Assembly Department Cost of goods completed and transferred out during October from the Assembly Dept. to the Testing Dept. b. Finished Goods Work in Process––Testing Department Cost of goods completed and transferred out during October from the Testing Department to Finished Goods inventory.
1730
7,735,250 7,735,250
23,463,766 23,463,766
SOLUTION EXHIBIT 1734A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Testing Department of Larsen Company for October 2009.
Flow of Production Work in process, beginning (given) Transferredin during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 7,500 ´ (100% - 100%); 7,500 ´ (100% - 0%); 7,500 ´ (100% - 70%) Started and completed 18,800 ´ 100%; 18,800 ´ 100%; 18,800 ´ 100% Work in process, ending* (given) 3,700 ´ 100%; 3,700 ´ 0%; 3,700 ´ 60% Accounted for Work done in current period only §
(Step 2) (Step 1) Equivalent Units Physical Transferred Direct Conversion Units in Costs Materials Costs 7,500 (work done before current period) 22,500 30,000
7,500 0
7,500
2,250
18,800
18,800
18,800
3,700
0
2,220 ______
22,500
_____ 26,300
18,800 † 3,700 ______ 30,000
23,270
Degree of completion in this department: Transferredin costs, 100%; direct materials, 0%; conversion costs, 70%. 26,300 physical units completed and transferred out minus 7,500 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 60%. †
1731
SOLUTION EXHIBIT 1734B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Testing Department of Larsen Company for October 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $ 3,717,335 21,395,850 $25,113,185
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 1734A) Cost per equiv. unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (26,300 units): Work in process, beginning (7,500 units) Costs added to beg. work in process in current period Total from beginning inventory Started and completed (18,800 units) Total costs of units completed & transferred out Work in process, ending (3,700 units) Total costs accounted for
$ 3,717,335 3,150,000 6,867,335 16,596,431 23,463,766 1,649,419 $25,113,185
Direct Materials $ 0 9,704,700 $9,704,700
Conversion Costs $ 835,460 3,955,900 $4,791,360
$ 7,735,250
$9,704,700
$3,955,900
¸ $
¸ 26,300 $ 369.00
¸ 23,270 $ 170.00
22,500 343.79
$2,881,875 + $0 + $835,460 (0 * ´ $343.79) + (7,500 * ´ $369.00) + (2,250 * ´ $170.00) (18,800 † ´ $343.79)+(18,800 † ´ $369.00)+(18,800 † ´$170.00) (3,700 # ´ $343.79) + (0 # ´ $369.00) + (2,220 # ´ $170.00) $10,617,125 + $9,704,700 + $4,791,360
*Equivalent units used to complete beginning work in process from Solution Exhibit 1734A, Step 2. † Equivalent units started and completed from Solution Exhibit 1734A, Step 2. # Equivalent units in ending work in process from Solution Exhibit 1734A, Step 2.
1732
Transferredin Costs $ 2,881,875 7,735,250 $10,617,125
1735 (25 min.) Weightedaverage method. Solution Exhibit 1735A shows equivalent units of work done to date of: Direct materials Conversion costs
625 equivalent units 525 equivalent units
Note that direct materials are added when the Assembly Department process is 10% complete. Both the beginning and ending work in process are more than 10% complete and hence are 100% complete with respect to direct materials. Solution Exhibit 1735B summarizes the total Assembly Department costs for April 2009, calculates cost per equivalent unit of work done to date for direct materials and conversion costs, and assigns these costs to units completed (and transferred out), and to units in ending work in process using the weightedaverage method. SOLUTION EXHIBIT 1735A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Assembly Department of Porter Handcraft for April 2009. (Step 1)
Flow of Production Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period Work in process, ending* (given) 125 ´ 100%; 125 ´ 20% Accounted for Work done to date
Physical Units 75 550 625 500 125
(Step 2) Equivalent Units Direct Conversion Materials Costs
500
500
125
25
625
525
625
*
Degree of completion in this department: direct materials, 100%; conversion costs, 20%.
1733
SOLUTION EXHIBIT 1735B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Assembly Department of Porter, April 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs
Direct Materials
Conversion Costs
$ 1,910 28,490 $30,400
$ 1,775 17,600 $19,375
$ 135 10,890 $11,025
$19,375
$11,025
¸ 625 $ 31
¸ $
(Step 4) Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1735A) Cost per equivalent unit of work done to date (Step 5) Assignment of costs: Completed and transferred out (500 units) Work in process, ending (125 units) Total costs accounted for *
$26,000 4,400 $30,400
(500 * ´ $31) + (500 * ´ $21) (125 † ´ $31) + (25 † ´ $21) $19,375 + $11,025
Equivalent units completed and transferred out from Solution Exhibit 1735A, Step 2. Equivalent units in ending work in process from Solution Exhibit 1735A, Step 2.
†
1734
525 21
1736 (5–10 min.)
Journal entries (continuation of 1735).
1. Work in Process–– Assembly Department Accounts Payable To record direct materials purchased and used in production during April
17,600
2. Work in Process–– Assembly Department Various Accounts To record Assembly Department conversion costs for April
10,890
3. Work in Process––Finishing Department Work in Process–– Assembly Department To record cost of goods completed and transferred out in April from the Assembly Department to the Finishing Department
26,000
17,600
10,890
26,000
Work in Process –– Assembly Department Beginning inventory, April 1 1,910 3. Transferred out to 1. Direct materials 17,600 Work in Process––Finishing 2. Conversion costs 10,890 Ending inventory, April 30 4,400
1735
26,000
1737 (20 min.) FIFO method (continuation of 1735). The equivalent units of work done in April 2009 in the Assembly Department for direct materials and conversion costs are shown in Solution Exhibit 1737A. Solution Exhibit 1737B summarizes the total Assembly Department costs for April 2009, calculates the cost per equivalent unit of work done in April 2009 in the Assembly Department for direct materials and conversion costs, and assigns these costs to units completed (and transferred out) and to units in ending work in process under the FIFO method. The equivalent units of work done in beginning inventory is: direct materials, 75 ´ 100% = 75; and conversion costs 75 ´ 40% = 30. The cost per equivalent unit of beginning inventory and of work done in the current period are:
Direct materials Conversion costs
Beginning Inventory $23.67 ($1,775 ¸ 75) $4.50 ($135 ¸ 30)
Work Done in Current Period (Calculated Under FIFO Method) $32 $22
The following table summarizes the costs assigned to units completed and those still in process under the weightedaverage and FIFO processcosting methods for our example.
Cost of units completed and transferred out Work in process, ending Total costs accounted for
Weighted Average FIFO (Solution (Solution Exhibit 1735B) Exhibit 1737B) Difference $26,000 $25,850 –$150 4,400 4,550 +$150 $30,400 $30,400
The FIFO ending inventory is higher than the weightedaverage ending inventory by $150. This is because FIFO assumes that all the lowercost priorperiod units in work in process are the first to be completed and transferred out while ending work in process consists of only the highercost currentperiod units. The weightedaverage method, however, smoothes out cost per equivalent unit by assuming that more of the highercost units are completed and transferred out, while some of the lowercost units in beginning work in process are placed in ending work in process. Hence, in this case, the weightedaverage method results in a higher cost of units completed and transferred out and a lower ending workinprocess inventory relative to the FIFO method.
1736
SOLUTION EXHIBIT 1737A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Assembly Department of Porter Handcraft for April 2009.
Flow of Production Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 75 ´ (100% - 100%); 75 ´ (100% - 40%) Started and completed 425 ´ 100%; 425 ´ 100% Work in process, ending* (given) 125 ´ 100%; 125 ´ 20% Accounted for Work done in current period only
(Step 1) Physical Units 75 550 625
(Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
75 0
45
425
425
125
25
550
495
425 † 125 625
§
Degree of completion in this department: direct materials, 100%; conversion costs, 40%. 500 physical units completed and transferred out minus 75 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: direct materials, 100%; conversion costs, 20%. †
SOLUTION EXHIBIT 1737B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Assembly Department of Porter Handcraft for April 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs added in current period Divide by equivalent units of work done in current period (Exhibit 1737A) Cost per equivalent unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (500 units): Work in process, beginning (75 units) Costs added to begin. work in process in current period Total from beginning inventory Started and completed (425 units) Total costs of units completed & tsfd. out Work in process, ending (125 units) Total costs accounted for
Total Production Costs $ 1,910 28,490 $30,400
Direct Materials $ 1,775 17,600 $19,375 $17,600
Conversion Costs $ 135 10,890 $11,025 $10,890
¸ 550
¸ 495
$
$
32
$ 1,910
$1,775
+
990 2,900 22,950 25,850 4,550 $30,400
(0 * ´ $32) +
$135 (45 * ´ $22)
(425 † ´ $32) + (425 † ´ $22) (125 # ´ $32) + $19,375 +
*Equivalent units used to complete beginning work in process from Solution Exhibit 1737A, Step 2. † Equivalent units started and completed from Solution Exhibit 1737A, Step 2. # Equivalent units in ending work in process from Solution Exhibit 1737A, Step 2.
1737
22
(25 # ´ $22) $11,025
1738 (30 min.) Transferredin costs, weighted average. 1. Solution Exhibit 1738A computes the equivalent units of work done to date in the Binding Department for transferredin costs, direct materials, and conversion costs. Solution Exhibit 1738B summarizes total Binding Department costs for April 2009, calculates the cost per equivalent unit of work done to date in the Binding Department for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the weightedaverage method. 2.
Journal entries: a. Work in Process–– Binding Department Work in Process––Printing Department Cost of goods completed and transferred out during April from the Printing Department to the Binding Department b. Finished Goods Work in Process–– Binding Department Cost of goods completed and transferred out during April from the Binding Department to Finished Goods inventory
144,000 144,000
249,012 249,012
SOLUTION EXHIBIT 1738A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Binding Department of Publish, Inc. for April 2009. (Step 1)
Flow of Production Work in process, beginning (given) Transferredin during current period (given) To account for Completed and transferred out during current period: Work in process, ending a (given) (600 ´ 100%; 600 ´ 0%; 600 ´ 60%) Accounted for Work done to date a
(Step 2) Equivalent Units Physical Transferred Direct Conversion Units in Costs Materials Costs 900 2,700 3,600 3,000 3,000 3,000 3,000 600 600 0 360 3,600 3,600 3,000 3,360
Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 60%.
1738
SOLUTION EXHIBIT 1738B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Binding Department of Publish, Inc. for April 2009.
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for
(Step 4)
Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1738A) Cost per equivalent unit of work done to date
(Step 5)
a
Total Production Transferredin Costs Costs $ 47,775 $ 32,775 239,700 144,000 $287,475 $176,775
Assignment of costs: Completed and transferred out (3,000 units) Work in process, ending (600 units):
$249,012 38,463
Total costs accounted for
$287,475
Equivalent units completed and transferred out from Sol. Exhibit 1738A, step 2. Equivalent units in ending work in process from Sol. Exhibit 1738A, step 2.
b
1739
Direct Materials $ 0 26,700 $26,700
Conversion Costs $15,000 69,000 $84,000
$176,775
$26,700
$84,000
÷ 3,600 $ 49.104
÷ 3,000 $ 8.90
÷ 3,360 $ 25
(3,000 a × $49.104) + (3,000 a × $8.90) + (3,000 a × $25) (600 b × $49.104) + (0 b × $8.90) + (360 b × $25)
$176,775
+ $26,700
+ $84,000
1739 (30 min.) Transferredin costs, FIFO method (continuation of 1738). 1. Solution Exhibit 1739A calculates the equivalent units of work done in April 2009 in the Binding Department for transferredin costs, direct materials, and conversion costs. Solution Exhibit 1739B summarizes total Binding Department costs for April 2009, calculates the cost per equivalent unit of work done in April 2009 in the Binding Department for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the FIFO method. Journal entries: a. Work in Process–– Binding Department Work in Process––Printing Department Cost of goods completed and transferred out during April from the Printing Department to the Binding Department. b.
Finished Goods Work in Process–– Binding Department Cost of goods completed and transferred out during April from the Binding Department to Finished Goods inventory.
141,750 141,750
240,525 240,525
2. The equivalent units of work done in beginning inventory is: Transferredin costs, 900 ´ 100% = 900; direct materials, 900 ´ 0% = 0; and conversion costs, 900 ´ 40% = 360. The cost per equivalent unit of beginning inventory and of work done in the current period are:
Transferredin costs (weighted average) Transferredin costs (FIFO) Direct materials Conversion costs
Beginning Inventory $36.42 ($32,775 ¸ 900) $30.95 ($27,855 ¸ 900) — $41.67 ($15,000 ¸ 360)
Work Done in Current Period $53.33 ($144,000 ¸ 2,700) $52.50 ($141,750 ¸ 2,700) $ 8.90 $23.00
The following table summarizes the costs assigned to units completed and those still in process under the weightedaverage and FIFO processcosting methods for the Binding Department. Weighted Average FIFO (Solution (Solution Exhibit 1738B) Exhibit 1739B) Difference Cost of units completed and transferred out $249,012 $240,525 –$8,487 Work in process, ending 38,463 39,780 +$1,317 Total costs accounted for $287,475 $280,305
1740
The FIFO ending inventory is higher than the weightedaverage ending inventory by $1,317. This is because FIFO assumes that all the lowercost priorperiod units in work in process (resulting from the lower transferredin costs in beginning inventory) are the first to be completed and transferred out while ending work in process consists of only the highercost currentperiod units. The weightedaverage method, however, smoothes out cost per equivalent unit by assuming that more of the highercost units are completed and transferred out, while some of the lowercost units in beginning work in process are placed in ending work in process. Hence, in this case, the weightedaverage method results in a higher cost of units completed and transferred out and a lower ending workinprocess inventory relative to FIFO. Note that the difference in cost of units completed and transferred out (–$8,487) does not fully offset the difference in ending workinprocess inventory (+$1,317). This is because the FIFO and weightedaverage methods result in different values for transferredin costs with respect to both beginning inventory and costs transferred in during the period. SOLUTION EXHIBIT 1739A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Binding Department of Publish, Inc. for April 2009. (Step 1)
Flow of Production Work in process, beginning (given) Transferredin during current period (given) To account for Completed and transferred out during current period: From beginning work in process a [900 ´ (100% – 100%); 900 ´ (100% – 0%); 900 Started and completed (2,100 ´ 100%; 2,100 ´ 100%; 2,100 ´ 100%) Work in process, ending c (given) (600 ´ 100%; 600 x 0%; 600 ´ 60%) Accounted for Work done in current period only a
(Step 2) Equivalent Units
Physical Transferredin Direct Conversion Units Costs Materials Costs 900 (work done before current period) 2,700 3,600 900
´ (100% – 40%)]
0
900
540
2,100
2,100
2,100
600 ____ 2,700
0 ____ 3,000
360 ____ 3,000
2,100 b 600 ____ 3,600
Degree of completion in this department: Transferredin costs, 100%; direct materials, 0%; conversion costs, 40%.
b
3,000 physical units completed and transferred out minus 900 physical units completed and transferred out from beginning workinprocess inventory.
c
Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 60%.
1741
SOLUTION EXHIBIT 1739B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Binding Department of Publish, Inc. for April 2009.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs Transferredin Costs $ 42,855 $ 27,855 237,450 141,750 $280,305 $169,605
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Sol. Exhibit 1739A) Cost per equivalent unit of work done in current period (Step 5) Assignment of costs: Completed and transferred out (3,000 units) Work in process, beginning (900 units) Costs added to beginning work in process in current period Total from beginning inventory Started and completed (2,100 units) Total costs of units completed and transferred out Work in process, ending (600 units): Total costs accounted for a
$ 42,855 20,430 63,285 177,240 240,525 39,780 $280,305
1742
Conversion Costs $15,000 69,000 $84,000
$141,750
$26,700
$69,000
÷ 2,700 $ 52.50
÷ 3,000 $ 8.90
÷ 3,000 $ 23.00
$27,855 + (0 a × $52.50) +
$0 + $15,000 (900 a × $8.90) + (540 a × $23)
(2,100 b × $52.50) + (2,100 b × $8.90) + (2,100 b × $23) (600 c × $52.50) + $169,605 +
Equivalent units used to complete beginning work in process from Solution Exhibit 1739A, step 2. Equivalent units started and completed from Solution Exhibit 1739A, step 2. c Equivalent units in ending work in process from Solution Exhibit 1739A, step 2. b
Direct Materials $ 0 26,700 $26,700
(0 c × $8.90) + (360 c × $23) $26,700 + $84,000
1740 (45 min.) Transferredin costs, weightedaverage and FIFO methods. 1. Solution Exhibit 1740A computes the equivalent units of work done to date in the Drying and Packaging Department for transferredin costs, direct materials, and conversion costs. Solution Exhibit 1740B summarizes total Drying and Packaging Department costs for week 37, calculates the cost per equivalent unit of work done to date in the Drying and Packaging Department for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the weightedaverage method. 2. Solution Exhibit 1740C computes the equivalent units of work done in week 37 in the Drying and Packaging Department for transferredin costs, direct materials, and conversion costs. Solution Exhibit 1740D summarizes total Drying and Packaging Department costs for week 37, calculates the cost per equivalent unit of work done in week 37 in the Drying and Packaging Department for transferredin costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the FIFO method. SOLUTION EXHIBIT 1740A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Drying and Packaging Department of FritoLay Inc. for Week 37. (Step 1) (Step 2) Equivalent Units Physical Transferred Direct Conversion Flow of Production Units in Costs Materials Costs Work in process, beginning (given) 1,250 Transferred in during current period (given) 5,000 To account for 6,250 Completed and transferred out during current period 5,250 5,250 5,250 5,250 Work in process, ending* (given) 1,000 1,000 ´ 100%; 1,000 ´ 0%; 1,000 ´ 40% 1,000 0 400 Accounted for 6,250 Work done to date 6,250 5,250 5,650 * Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 40%.
1743
SOLUTION EXHIBIT 1740B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; WeightedAverage Method of Process Costing, Drying and Packaging Department of FritoLay Inc. for Week 37.
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for
(Step 4)
Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 1740A) Equivalent unit costs of work done to date
(Step 5)
Assignment of costs: Completed and transferred out (5,250 units) Work in process, ending (1,000 units) Total costs accounted for
*
Total Production Costs $ 38,060 159,600 $197,660
$174,300 23,360 $197,660
Equivalent units completed and transferred out from Solution Exhibit 1740A, Step 2. †Equivalent units in ending work in process from Solution Exhibit 1740A, Step 2.
1744
Transferred in Costs $ 29,000 96,000 $125,000
Direct Materials $ 0 25,200 $25,200
Conversion Costs $ 9,060 38,400 $47,460
$125,000
$25,200
$47,460
¸ 6,250 $ 20
¸ 5,250 $ 4.80
¸ 5,650 $ 8.40
(5,250 *´ $20) + (5,250 *´ $4.80) + (5,250 *´ $8.40) (1,000 † ´ $20) + (0 † ´ $4.80) + (400 † ´ $8.40)
$125,000 +
$25,200
+ $47,460
SOLUTION EXHIBIT 1740C Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Drying and Packaging Department of FritoLay Inc. for Week 37.
Flow of Production Work in process, beginning (given) Transferredin during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 1,250 ´ (100% - 100%); 1,250 ´ (100% - 0%); 1,250 ´ (100% - 80%) Started and completed 4,000 ´ 100%; 4,000 ´ 100%; 4,000 ´ 100% Work in process, ending* (given) 1,000 ´ 100%; 1,000 ´ 0%; 1,000 ´ 40% Accounted for Work done in current period only §
(Step 1) Physical Units 1,250 5,000 6,250
(Step 2) Equivalent Units Transferred Direct Conversion in Costs Materials Costs (work done before current period)
1,250 0
1,250
250
4,000
4,000
4,000
1,000
0
400
5,000
5,250
4,650
4,000 † 1,000 6,250
Degree of completion in this department: Transferredin costs, 100%; direct materials, 0%; conversion costs, 80%. 5,250 physical units completed and transferred out minus 1,250 physical units completed and transferred out from beginning workinprocess inventory. *Degree of completion in this department: transferredin costs, 100%; direct materials, 0%; conversion costs, 40%. †
1745
SOLUTION EXHIBIT 1740D Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; FIFO Method of Process Costing, Drying and Packaging Department of FritoLay Inc. for Week 37.
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Total Production Costs $ 37,980 157,600 $195,580
(Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 1740C) Cost per equivalent unit of work done in current period
Transferred in Costs $ 28,920 94,000 $122,920
Direct Materials $ 0 25,200 $25,200
Conversion Costs $ 9,060 38,400 $47,460
$ 94,000
$25,200
$38,400
¸ 5,000 $ 18.80
¸ 5,250 $ 4.80
¸ 4,650 $ 8.258
(Step 5) Assignment of costs: Completed and transferred out (5,250 units): Work in process, beginning (1,250 units) Costs added to beg. work in process in current period Total from beginning inventory Started and completed (4,000 units) Total costs of units completed & transferred out Work in process, ending (1,000 units) Total costs accounted for
$ 37,980 8,065 46,045 127,432 173,477 22,103 $195,580
$28,920 + $0 + $9,060 * * (0 ´ $18.80) + (1,250 ´ $4.80) + (250 ´ $8.258) *
(4,000 † ´ $18.80) + (4,000 † ´ $4.80) + (4,000 † ´ $8.258) (1,000 # ´ $18.80) + (0 # ´ $4.80) + $122,920 + $25,200
(Step 3) *
Equivalent units used to complete beginning work in process from Solution Exhibit 1740C, Step 2. Equivalent units started and completed from Solution Exhibit 1740C, Step 2. # Equivalent units in ending work in process from Solution Exhibit 1740C, Step 2. †
1746
(400 # ´ $8.258) $47,460
1741 (3035 min.) Weightedaverage and standardcosting method. 1. Solution Exhibit 1741A computes the equivalent units of work done in November 2010 by Paquita’s Pearls Company for direct materials and conversion costs. 2. and 3. Solution Exhibit 1741B summarizes total costs of the Paquita’s Pearls Company for November 30, 2010 and, using the standard cost per equivalent unit for direct materials and conversion costs, assigns these costs to units completed and transferred out and to units in ending work in process. The exhibit also summarizes the cost variances for direct materials and conversion costs for November 2010. SOLUTION EXHIBIT 1741A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Standard Costing Method of Process Costing, Paquita’s Pearls Company for the month ended November 30, 2010. (Step 2) Equivalent Units Direct Conversion Materials Costs 25,000 (work done before current period)
(Step 1) Physical Units
Flow of Production
Work in process, beginning (given) Started during current period (given) To account for Completed and transferred out during current period: From beginning work in process § 25,000 ´ (100% - 100%); 25,000 ´ (100% – 75%) Started and completed 100,000 ´ 100%, 100,000 ´ 100% Work in process, ending* (given) 26,250 ´ 100%; 26,250 ´ 50% Accounted for Work done in current period only
126,250 151,250 25,000 0
6,250
100,000
100,000
26,250 _______ 126,250
13,125 _______ 119,375
100,000 † 26,250 _______ 151,250
§
Degree of completion in this department: direct materials, 100%; conversion costs, 75%.
†
125,000 physical units completed and transferred out minus 25,000 physical units completed and transferred out from beginning workinprocess inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
1747
SOLUTION EXHIBIT 1741B Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process; StandardCosting Method of Process Costing, Paquita’s Pearls Company for the month ended November 30, 2010.
(Step 3) Work in process, beginning (given) Costs added in current period at standard costs Total costs to account for
Total Production Direct Conversion Costs Materials Costs $ 250,000 $ 62,500 + $ 187,500 1,509,375 (126,250 ´ 2.50) + (119,375 ´ $10.00) $1,759,375 $378,125 + $1,381,250
(Step 4) Standard cost per equivalent unit (given) (Step 5) Assignment of costs at standard costs: Completed and transferred out (125,000 units): Work in process, beginning (25,000 units) $ 250,000 Costs added to beg. work in process in current period 62,500 Total from beginning inventory 312,500 Started and completed (100,000 units) 1,250,000 Total costs of units transferred out 1,562,500 Work in process, ending (26,250 units) 196,875 Total costs accounted for $1,759,375 Summary of variances for current performance: Costs added in current period at standard costs (see Step 3 above) Actual costs incurred (given) Variance
$
2.50
Equivalent units started and completed from Solution Exhibit 1741A, Step 2.
#
Equivalent units in ending work in process from Solution Exhibit 1741A, Step 2.
1748
10.00
$62,500 + $187,500 (0* ´ $2.50) + (6,250* ´ $10.00) (100,000 † ´ $2.50) + (100,000 † ´ $10.00) (26,250 # ´ $2.50) + (13,125 # ´ $10.00) $378,125 + $1,381,250 $315,625 327,500 $ 11,875 U
*Equivalent units to complete beginning work in process from Solution Exhibit 1741A, Step 2. †
$
$1,193,750 1,207,415 $ 13,665 U
1742 (2530 min.) Operation costing 1. To obtain the overhead rates, divide the budgeted cost of each operation by the pairs of shoes that are expected to go through that operation.
Operation 1 Operation 2 Operation 3 Operation 4 Operation 5 Operation 6
Budgeted Conversion Cost $145,125 58,050 4,275 67,725 13,500 2,025
Budgeted Pairs of Shoes 32,250 32,250 2,250 32,250 30,000 2,250
Conversion Cost per Pair of Shoes $4.50 1.80 1.90 2.10 0.45 0.90
2.
Shoe type: Quantity: Direct Materials Operation 1 Operation 2 Operation 3 Operation 4 Operation 5 Operation 6 Total
Work Order 10399 Basic 1,000 $13,000 4,500 1,800 0 2,100 450 0 $21,850
Work Order 10400 Elaborate 150 $4,200 675 270 285 315 0 135 $5,880
The direct materials costs per unit vary based on the type of shoe ($390,000 ÷ 30,000 = $13 for the Basic, and $63,000 ÷ 2,250 = $28 for the Elaborate). Conversion costs are charged using the rates computed in part (1), taking into account the specific operations that each type of shoe actually goes through. 3.
Work order 10399 (Basic shoes):
Work order 10400 (Elaborate shoes):
Total cost $21,850 Divided by number of pairs of shoes: ÷ 1,000 Cost per pair of plain shoes: $ 21.85
Total cost: $5,880 Divided by number of pairs of shoes: ÷ 150 Cost per pair of fancy shoes: $39.20
1749
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