Download - Acct 303 Chapter 17

CHAPTER 17PROCESS COSTING

17-16 (25 min.) Equivalent units, zero beginning inventory.

1. Direct materials cost per unit ($750,000 ÷ 10,000) $ 75.00Conversion cost per unit ($798,000 ÷ 10,000) 79 .80 Assembly Department cost per unit $1 5 4 .80

2a. Solution Exhibit 17-16A calculates the equivalent units of direct materials and conversion costs in the Assembly Department of Nihon, Inc. in February 2009.

Solution Exhibit 17-16B computes equivalent unit costs.

2b. Direct materials cost per unit $ 75Conversion cost per unit 8 4 Assembly Department cost per unit $15 9

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 17-16ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Assembly Department of Nihon, Inc. for February 2009.

(Step 2)(Step 1) Equivalent UnitsPhysical Direct Conversion

Flow of Production Units Materials CostsWork in process, beginning (given) 0Started during current period (given) 10,000To account for 10,000Completed and transferred out during current period 9,000 9,000 9,000Work in process, ending* (given) 1,000 1,000 100%; 1,000 50% 1,000 500Accounted for 10,000Work done in current period 10,000 9,500

*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.

17-1

SOLUTION EXHIBIT 17-16BCompute Cost per Equivalent Unit, Assembly Department of Nihon, Inc. for February 2009.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Costs added during February $1,548,000 $750,000 $798,000

Divide by equivalent units of work done in current period (Solution Exhibit 17-l6A) 10,000 9,500 Cost per equivalent unit $ 7 5 $ 8 4

17-17 (20 min.) Journal entries (continuation of 17-16).

1. Work in Process––Assembly 750,000Accounts Payable 750,000

To record $750,000 of direct materialspurchased and used in production during February 2009

2. Work in Process––Assembly 798,000Various accounts 798,000

To record $798,000 of conversion costsfor February 2009; examples include energy, manufacturing supplies, all manufacturinglabor, and plant depreciation

3. Work in Process––Testing 1,431,000Work in Process––Assembly 1,431,000

To record 9,000 units completed andtransferred from Assembly to Testingduring February 2009 at$159 9,000 units = $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 1,431,000 2. Conversion costs 798 ,000

Ending inventory, Feb. 28 117,000

17-2

17-18 (25 min.) Zero beginning inventory, materials introduced in middle of process.

1. Solution Exhibit 17-18A 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 17-18B 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 17-18ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Mixing Department of Roary Chemicals for July 2009.

(Step 1) (Step 2)Equivalent Units

Physical ConversionFlow of Production Units Chemical P Chemical Q Costs

Work in process, beginning (given) 0Started during current period (given) 50,000To account for 50,000Completed and transferred out during current period 35,000 35,000 35,000 35,000Work in process, ending* (given) 15,000 15,000 100%; 15,000 0%; 15,000 66 2/3% 15,000 0 10,000Accounted for 50,000Work done in current period only 50,000 35,000 45,000

*Degree of completion in this department: Chemical P, 100%; Chemical Q, 0%; conversion costs, 66 2/3%.

17-3

SOLUTION EXHIBIT 17-18BSteps 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.

TotalProduction

Costs Chemical P Chemical QConversion

Costs(Step 3) Costs added during July $455,000 $250,000 $70,000 $135,000 Total costs to account for $455,000 $250,000 $70,000 $135,000

(Step 4) Costs added in current period $250,000 $70,000 $135,000Divide by equivalent units of work done in current period

(Solution Exhibit 17-l8A) 50,000 35,000 45,000 Cost per equivalent unit $ 5 $ 2 $ 3

(Step 5) Assignment of costs:Completed and transferred out (35,000 units) $350,000 (35,000* $5) + (35,000* $2) + (35,000* $3)Work in process, ending (15,000 units) 105,000 (15,000 † $5) + (0 † $2) + (10,000 † $3) Total costs accounted for $455,000 $250,000 + $70,000 + $135,000

*Equivalent units completed and transferred out from Solution Exhibit 17-18A, Step 2. †Equivalent units in ending work in process from Solution Exhibit 17-18A, Step 2.

17-19 (15 min.) Weighted-average method, equivalent units.

Under the weighted-average method, equivalent units are calculated as the equivalent units of work done to date. Solution Exhibit 17-19 shows equivalent units of work done to date for the Assembly Division of Fenton Watches, Inc., for direct materials and conversion costs.

SOLUTION EXHIBIT 17-19Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average 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 CostsWork in process beginning (given) 80Started during current period (given) 50 0 To account for 58 0 Completed and transferred out during current period 460 460 460Work in process, ending* (120 60%; 120 30%) 12 0 72 36Accounted for 58 0 ___ ___Work done to date 532 496


17-4

17-20 (20 min.) Weighted-average method, assigning costs (continuation of 17-19).

Solution Exhibit 17-20 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 work-in-process inventory.

SOLUTION EXHIBIT 17-20Steps 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;Weighted-Average Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $ 584,400 $ 493,360 $ 91,040

Costs added in current period (given) 4 , 612 , 000 3 , 220 , 000 1 , 392 , 000 Total costs to account for $5 , 196 , 400 $3 , 713 , 360 $1 , 483 , 040

(Step 4) Costs incurred to date $3,713,360 $1,483,040Divide by equivalent units of work done to date (Solution Exhibit 17-19) 532 496 Cost per equivalent unit of work done to date $ 6 , 980 $ 2 , 990

(Step 5) Assignment of costs:

Completed and transferred out (460 units) $4,586,200 (460* $6,980) + (460* $2,990)

Work in process, ending (120 units) 610 , 200 (72 † $6 , 980) + (36 † $2 ,990 )

Total costs accounted for $5 , 196 , 400 $3 , 713 , 360 + $1 , 483 , 040

*Equivalent units completed and transferred out from Solution Exhibit 17-19, Step 2.† Equivalent units in work in process, ending from Solution Exhibit 17-19, Step 2.

17-5

17-21 (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 17-21 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 17-21Steps 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.

(Step 1)

(Step 2)Equivalent Units

Flow of ProductionPhysical

UnitsDirect

MaterialsConversion

CostsWork in process, beginning (given)Started during current period (given)To account for

8050 0 58 0

(work done before current period)

Completed and transferred out during current period:

From beginning work in process§

80(100% 90%); 80(100% 40%)80

8 48Started and completed 380 100%, 380 100%

380†

380 380Work in process, ending* (given)

120 60%; 120 30%120

___ 72 36Accounted for 58 0 Work done in current period only 460 464

§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 work-in-process inventory.*Degree of completion in this department: direct materials, 60%; conversion costs, 30%.

17-6

17-22 (20 min.) FIFO method, assigning costs (continuation of 17-21).

Solution Exhibit 17-22 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 work-in-process inventory.

SOLUTION EXHIBIT 17-22Steps 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.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $ 584,400 $ 493,360 $ 91,040 Costs added in current period (given) 4 , 612 , 000 3,220,000 1 , 392 , 000 Total costs to account for $5 , 196 , 400 $3,713,36

0 $1 , 483 , 040

(Step 4) Costs added in current period $3,220,000 $1,392,000 Divide by equivalent units of work done in current period (Solution Exhibit 17-21)

46 0 464

Cost per equiv. unit of work done in current period $ 7 ,000 $ 3 ,000

(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

$ 584,400

200 , 000

$493,360 + $91,040

(8* $7,000) + (48* $3,000)

Total from beginning inventoryStarted and completed (380 units)

Total costs of units completed and transferred out

Work in process, ending (120 units) Total costs accounted for

784,400 3 , 800 , 000

4,584,400 612 , 000 $5 , 196 , 400

(380† $7,000) + (380† $3,000)

(72 # $7 ,000 ) + (36 # $3 ,000 ) $3,713,360 + $1,483,040

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-21, Step 2.†Equivalent units started and completed from Solution Exhibit 17-21, Step 2.#Equivalent units in work in process, ending from Solution Exhibit 17-21, Step 2.

17-7

17-23 (20-25 min.) Standard-costing method, assigning costs.

1.

SOLUTION EXHIBIT 17-23ASteps 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 1)



UnitsDirect

MaterialsConversion

Costs

Work in process, beginning (given)Started during current period (given)To account for

185,000465 ,000 650,0 00


Completed and transferred out during current period:From beginning work in process§

185,000 (100% 100%); 185,000 (100% – 25%) 185,000

0 138,750Started and completed 327,000 100%, 327,000 100%

327,000†

327,000 327,000Work in process, ending* (given)

138,000 100%; 138,000 80% 138,000_______ 138,000 110,400

Accounted for 650 ,0 00 _______ _______Work done in current period only 465 ,000 5 76,15 0

§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 work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 80%.

17-8

2.

SOLUTION EXHIBIT 17-23BSteps 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

TotalProduction

CostsDirect

MaterialsConversion

Costs (Step 3) Work in process, beginning (given) $ 337,625 $240,500 + $ 97,125

Costs added in current period at standard costs 1,814,415 ( 465 ,000 $1.30) + ( 576 , 1 5 0 $2.10) Total costs to account for $ 2,152 , 0 40 $845,000 + $1,307,040

(Step 4) Standard cost per equivalent unit (given) $ 1.30 $ 2.10

(Step 5) Assignment of costs at standard costs:Completed and transferred out (512,000 units):

Work in process, beginning (185,000 units) Costs added to beg. work in process in current period

Total from beginning inventory

$ 337,625 2 9 1 ,3 75

629,000

$240,500 + $97,125 (0* $1.30) + (138,750* $2.10)

Started and completed (327,000 units) Total costs of units transferred out

1,1 11 ,800 1,740,800

(327,000† $1.30) + (327,000† $2.10)

Work in process, ending (138,000 units) 411,24 0 ( 138 ,000 # $1.30) + ( 1 1 0 ,400 # $2.10) Total costs accounted for $ 2,152,0 40 $845,000 + $1,307,040Summary of variances for current performance:Costs added in current period at standard costs (see Step 3 above)Actual costs incurred (given)Variance

$604,500 607 ,500 $ 3,000 U

$1,209,915 1,207,415 $ 2 , 500 F

*Equivalent units to complete beginning work in process from Solution Exhibit 17-23A, Step 2.†Equivalent units started and completed from Solution Exhibit 17-23A, Step 2.

#Equivalent units in ending work in process from Solution Exhibit 17-23A, Step 2.

17-9

17-24 (25 min.) Weighted-average method, assigning costs.

1. & 2.

Solution Exhibit 17-24A shows equivalent units of work done to date for Bio Doc Corporation for direct materials and conversion costs.

Solution Exhibit 17-24B 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 work-in-process inventory.

SOLUTION EXHIBIT 17-24ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing, Bio Doc Corporation for July 2008.

(Step 2)(Step 1) Equivalent UnitsPhysical Direct Conversion

Flow of Production Units Materials CostsWork in process, beginning (given) 12,500Started during current period (given) 50,000To account for 62,500Completed and transferred out during current period 42,500 42,500 42,500Work in process, ending* (given) 20,000 20,000 100%; 20,000 50% 20,000 10,000Accounted for 62,500Work done to date 62,500 52,500

*Degree of completion: direct materials, 100%; conversion costs, 50%.

17-10

SOLUTION EXHIBIT 17-24BSteps 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;Weighted-Average Method of Process Costing, Bio Doc Corporation for July 2008.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $162,500 $ 75,000 $ 87,500

Costs added in current period (given) 813 ,750 35 0,000 463,75 0 Total costs to account for $976,250 $ 425 ,000 $ 551,25 0

(Step 4) Costs incurred to date $425,000 $551,250Divide by equivalent units of work done to date (Solution Exhibit 17-24A)

62,5 00 52,5 00

Cost per equivalent unit of work done to date $ 6.80 $ 10.50

(Step 5) Assignment of costs:Completed and transferred out (42,500 units)

$735,250(42,500* $6.80) + (42,500* $10.50)

Work in process, ending (20,000 units) 241,0 00

( 20 ,000 † $6.80) + ( 10 ,000 † $10.50)

Total costs accounted for $ 976,25 0 $ 425 ,000 + $ 551,25 0

*Equivalent units completed and transferred out (given).†Equivalent units in ending work in process (given).

17-11

17-25 (30 min.) FIFO method, assigning costs.

1. & 2. Solution Exhibit 17-25A calculates the equivalent units of work done in the current period. Solution Exhibit 17-25B 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 work-in-process inventory.

SOLUTION EXHIBIT 17-25ASteps 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 1)



UnitsDirect

MaterialsConversion

Costs


12,5005 0,000 62,5 00



12,500 (100% 100%); 12,500 (100% – 70%)

12,5000 3,750

Started and completed 30,000 100%, 30,000 100%

30,000†

30,000 30,000Work in process, ending* (given)

20,000 100%; 20,000 50% 20,000 20,000 10,000

Accounted for 62,5 00 Work done in current period only 50 ,000 43,75 0

§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 work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.

17-12

SOLUTION EXHIBIT 17-25BSteps 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.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $162,500 $ 75,000 $ 87,500 Costs added in current period (given) 813,75 0 350 ,000 463,75 0

Total costs to account for $ 976,25 0 $425,000 $551,250

(Step 4) Costs added in current period $350,000 $463,750

Divide by equivalent units of work done in current period (Solution Exhibit 17-25A)

50,000 43,75 0

Cost per equivalent unit of work done in current period $ 7 $ 10.60(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$162,500 3 9,75 0

$75,000 + $87,500 (0* $7) + (3,750* $10.60)

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)

202,250 528,0 00 730,250 246,0 00

(30,000† $7) + (30,000† $10.60)

(20 ,000 # $7 ) + (10 ,000 # $10.60)

Total costs accounted for $ 976,25 0 $425,000 + $551,250

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-25A, Step 2. †Equivalent units started and completed from Solution Exhibit 17-25A, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-25A, Step 2.

17-13

17-26 (30 min.) Standard-costing 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 17-25A shows the equivalent unit calculations for standard costing and computes the equivalent units of work done in July 2008. Solution Exhibit 17-26 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 work-in-process inventory.

2. Solution Exhibit 17-26 shows the direct materials and conversion costs variances for

Direct materials $20,000 UConversion costs $8,750 U

SOLUTION EXHIBIT 17-26Steps 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.

TotalProduction

CostsDirect

MaterialsConversion

Costs (Step 3) Work in process, beginning (given) $173,500 (12,500 $6.60) + (8,750 $10.40)

Costs added in current period at standard costs 785 ,000 ( 5 0,000 $6.60) + ( 43,75 0 $10.40) Total costs to account for $ 958,5 00 $412,500 + $546,000

(Step 4) Standard cost per equivalent unit (given) $ 6.60 $ 10.40(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 periodTotal from beginning inventory

$173,500 3 9,0 00 212,500

(12,500 $6.60) + (8,750 $10.40) (0* $6.60) + (3,750* $10.40)


510 ,000 722,500

(30,000† $6.60) + (30,000† $10.40)

Work in process, ending (20,000 units) 236,0 00 ( 20 ,000 # $6.60) + ( 10 ,000 # $10.40)

Total costs accounted for $ 958,5 00 $412,500 + $546,000Summary of variances for current performance:Costs added in current period at standard costs (see Step 3 above)Actual costs incurred (given)Variance

$330,000 350 ,000 $ 20 ,000 U

$455,000 463,75 0 $ 8,75 0 U

*Equivalent units to complete beginning work in process from Solution Exhibit 17-25A, Step 2.†Equivalent units started and completed from Solution Exhibit 17-25A, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-25A, Step 2.

17-14

17-27 (35–40 min.) Transferred-in costs, weighted-average method.

1, 2. & 3. Solution Exhibit 17-27A calculates the equivalent units of work done to date. Solution Exhibit 17-27B summarizes total costs to account for, calculates the cost per equivalent unit of work done to date for transferred-in costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work-in-process inventory.

SOLUTION EXHIBIT 17-27ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent UnitsWeighted-Average Method of Process Costing;Finishing Department of Asaya Clothing for June 2009.

(Step 1) (Step 2) Equivalent Units


UnitsTransferred-

in CostsDirect

MaterialsConversion

Costs

Work in process, beginning (given) 75Transferred in during current period (given) 135To account for 210Completed and transferred out during current period 150 150 150 150Work in process, ending* (given) 60 60 100%; 60 0%; 60 75% 60 0 45Accounted for 21 0 Work done to date 21 0 1 5 0 1 95

*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.

17-15

SOLUTION EXHIBIT 17-27BSteps 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;Weighted-Average Method of Process Costing,Finishing Department of Asaya Clothing for June 2009.

Total Production

CostsTransferred-in

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $105,000 $ 75,000 $ 0 $ 30,000

Costs added in current period (given) 258 ,000 142,5 00 37,5 00 78 ,000 Total costs to account for $ 363 ,000 $ 217,5 00 $ 37,5 00 $ 108 ,000

(Step 4) Costs incurred to date $ 217,500 $37,500 $108,000Divide by equivalent units of work done to date (Solution Exhibit 17-27A) ÷ 21 0 ÷ 1 5 0 ÷ 1 95 Cost per equivalent unit of work done to date $1,035.71 $ 250 $ 553.85

(Step 5) Assignment of costs:Completed and transferred out (150 units) $275,934 (150 a $1,035.71) + (150 a $250) + (150a $553.85)Work in process, ending (60 units): 87,066 ( 6 0 b $1,035.71) + (0 b $250) + ( 45 b $553.85) Total costs accounted for $ 363 ,000 $ 217,5 00 + $ 37,5 00 + $ 108 ,000

a Equivalent units completed and transferred out from Sol. Exhibit 17-27, step 2. b Equivalent units in ending work in process from Sol. Exhibit 17-27A, step 2.

17-16

17-28 (35–40 min.) Transferred-in costs, FIFO method.

Solution Exhibit 17-28A calculates the equivalent units of work done in the current period (for transferred-in costs, direct-materials, and conversion costs) to complete beginning work-in-process inventory, to start and complete new units, and to produce ending work in process. Solution Exhibit 17-28B summarizes total costs to account for, calculates the cost per equivalent unit of work done in the current period for transferred-in costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work-in-process inventory.

SOLUTION EXHIBIT 17-28ASteps 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) (Step 2)

Equivalent Units


UnitsTransferred-in

CostsDirect

MaterialsConversion

CostsWork in process, beginning (given) 75 (work done before current period)Transferred-in during current period (given) 135To account for 21 0 Completed and transferred out during current period: From beginning work in processa 75 [75 (100% – 100%); 75 (100% – 0%); 75 (100% – 60%)] 0 75 30 Started and completed 75b

(75 100%; 75 100%; 75 100%) 75 75 75Work in process, endingc (given) 60 (60 100%; 60 0%; 60 75%) ___ 60 0 45Accounted for 21 0 ___ ___ ___Work done in current period only 135 1 5 0 1 5 0

aDegree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.b150 physical units completed and transferred out minus 75 physical units completed and transferred out from beginning work-in-process inventory.

cDegree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.

17-17

SOLUTION EXHIBIT 17-28BSteps 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.

Total Production

CostsTransferred-in

Costs Direct Materials Conversion Costs(Step 3) Work in process, beginning (given) $ 90,000 $ 60,000 $ 0 $ 30,000

Costs added in current period (given) 246,3 00 130,8 00 37,5 00 78 ,000 Total costs to account for $ 336,3 00 $190,800 $37,500 $108,000

(Step 4) Costs added in current period $130,800 $37,500 $ 78,000Divide by equivalent units of work done in current period (Solution Exhibit 17-28A) ÷ 135 ÷ 1 5 0 ÷ 1 5 0 Cost per equivalent unit of work done in current period $ 968.89 $ 250 $ 520

(Step 5) Assignment of costs:Completed and transferred out (150 units) Work in process, beginning (75 units) $ 90,000 $ 60,000 $ 0 $ 30,000 Costs added to beginning work in process in current period 34 , 350 (0a $968.89) + (75a $250) + (30 a $520) Total from beginning inventory 124,350 Started and completed (75 units) 130,416 (75b $968.89) + (75b $250) + (75b $520) Total costs of units completed and transferred out 254,766Work in process, ending (60 units): 81,534 ( 6 0 c $968.89) + (0 c $250) + ( 45 c $520) Total costs accounted for $ 336,3 00 $190,800 + $37,500 + $108,000

a Equivalent units used to complete beginning work in process from Solution Exhibit 17-28A, step 2. b Equivalent units started and completed from Solution Exhibit 17-28A, step 2. c Equivalent units in ending work in process from Solution Exhibit 17-28A, step 2.

17-18

17-29 (15-20 min.) Standard-costing 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.

17-19

17-30 (25 min.) Weighted-average 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 17-30A shows equivalent units of work done to date:

Direct materials 25,000 equivalent unitsConversion costs 24,250 equivalent units

2. & 3. Solution Exhibit 17-30B 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 17-30ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing, Assembly Department of Larsen Company, for October 2009.


Physical Direct ConversionFlow of Production Units Materials Costs

Work in process, beginning (given) 5,000Started during current period (given) 20, 0 00 To account for 25, 0 00 Completed and transferred out during current period 22,500 22,500 22,500Work in process, ending* (given) 2,500 2,500 100%; 2,500 70% 2,500 1,750Accounted for 25, 0 00 Work done to date 25, 0 00 24, 25 0 *Degree of completion in this department: direct materials, 100%; conversion costs, 70%.

17-20

SOLUTION EXHIBIT 17-30BSteps 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;Weighted-Average Method of Process Costing, Assembly Department of Larsen Company, for October 2009.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $1,652,750 $1,250,000 $ 402,750

Costs added in current period (given) 6,837,5 00 4,5 00,000 2,337 , 5 00 Total costs to account for $ 8,490,250 $ 5 , 7 5 0,000 $ 2, 740 , 25 0

(Step 4) Costs incurred to date $5,750,000 $2,740,250Divide by equivalent units of work done to date (Solution Exhibit 17-30A) 25, 0 00 24, 25 0 Cost per equivalent unit of work done to date $ 2 30 $ 113

(Step 5) Assignment of costs:Completed and transferred out (22,500 units) $7,717,500 (22,500* $230) + (22,500*

$113)Work in process, ending (2,500 units) 772 , 750 ( 2,500 † $230) + ( 1, 75 0 †

$113)Total costs accounted for $ 8, 490 , 25 0 $ 6,15 0,000 + $ 2,6 19 , 0 00

*Equivalent units completed and transferred out from Solution Exhibit 17-30A, Step 2.†Equivalent units in work in process, ending from Solution Exhibit 17-30A, Step 2.

17-31 (10 min.) Journal entries (continuation of 17-30).

1. Work in Process––Assembly Department 4,500,000Accounts Payable 4,500,000

Direct materials purchased and used in production in October.

2. Work in Process––Assembly Department 2,337,500Various accounts 2,337,500

Conversion costs incurred in October.

3. Work in Process––Testing Department 7,717,500Work 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 DepartmentBeginning inventory, October 1 1,652,7501. Direct materials 4,500,0002. Conversion costs 2,337,500

3. Transferred out toWork in Process–Testing 7,717,500

Ending Inventory, October 31 772,750

17-21

17-32 (20 min.) FIFO method (continuation of 17-30).

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 17-32A.

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 17-32B.

3. Solution Exhibit 17-32B 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:

Beginning Inventory

Work Done in Current Period

Direct materialsConversion costsTotal cost per unit

$250.00 ($1,250,000 5,000 equiv. units) 134.25 ($ 402,750 3,000 equiv. units)$384.25

$225.00 11 0 .00 $335 .00

DirectMaterials

ConversionCosts

Cost per equivalent unit (weighted-average) $230* $113*

Cost per equivalent unit (FIFO) $225** $110**

*from Solution Exhibit 17-30B**from Solution Exhibit 17-32B

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 weighted-average uses the costs from the beginning work-in-process 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 weighted-average and FIFO process-costing methods for our example.

Weighted Average(Solution

Exhibit 17-30B)

FIFO(Solution

Exhibit 17-32B) DifferenceCost of units completed and transferred outWork in process, endingTotal costs accounted for

$7,717,500 772 , 750 $ 8, 490 , 2 50

$7,735,250 755 , 0 00 $ 8, 490 , 25 0

+ $17,750 $17,750

17-22

The FIFO ending inventory is lower than the weighted-average ending inventory by $17,750. This is because FIFO assumes that all the higher-cost prior-period units in work in process are the first to be completed and transferred out while ending work in process consists of only the lower-cost current-period units. The weighted-average method, however, smoothes out cost per equivalent unit by assuming that more of the lower-cost units are completed and transferred out, while some of the higher-cost units in beginning work in process are placed in ending work in process. So, in this case, the weighted-average method results in a lower cost of units completed and transferred out and a higher ending work-in-process inventory relative to the FIFO method.

SOLUTION EXHIBIT 17-32ASteps 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.



UnitsDirect

MaterialsConversion


5,000 20, 0 00 25, 0 00


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)2,500 100%; 2,500 70%

2,500_____ 2,500 1,750

Accounted for 25, 0 00 ______Work done in current period only 20, 0 00 21, 25 0

§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 work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.

17-23

SOLUTION EXHIBIT 17-32BSteps 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.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $1,652,750 $1,250,000 $ 402,750 Costs added in current period (given) 6,837,5 00 4,5 00,000 2,337,5 00 Total costs to account for $ 8, 490 , 25 0 $5,750,000 $2,740,250

(Step 4) Costs added in current period $4,500,000 $2,337,500 Divide by equivalent units of work done in current period (Solution Exhibit 17-32A) 20 ,00 0 21 ,250 Cost per equivalent unit of work done in current period $ 2 25 $ 110

(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

$1,652,750 220 ,000

$1,250,000 + $ 402,750 (0* $225) + (2,000*

$110) 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

1,872,750 5,862,5 00 7,735,250 755 ,000 $ 8, 490 , 25 0

(17,500† $225) + (17,500† $110)

( 2 , 5 00 # $2 25 ) + ( 1 ,750 # $110) $5,750,000 + $2,740,250

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-32A, Step 2.†Equivalent units started and completed from Solution Exhibit 17-32A, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-32A, Step 2.

17-24

17-33 (30 min.) Transferred-in costs, weighted-average method (related to 17-30 to 17-32).

1. Transferred-in costs are 100% complete, and direct materials are 0% complete in both beginning and ending work-in-process inventory. The reason is that transferred-in 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 17-33A computes the equivalent units of work done to date in the Testing Department for transferred-in costs, direct materials, and conversion costs.

3. Solution Exhibit 17-33B summarizes total Testing Department costs for October 2009, calculates the cost per equivalent unit of work done to date in the Testing Department for transferred-in 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 weighted-average method.

4. Journal entries:a. Work in Process––Testing Department 7,717,500

Work in Process––Assembly Department 7,717,500Cost of goods completed and transferred out

during October from the Assembly Department to the Testing Department

b. Finished Goods 23,459,600Work in Process––Testing Department 23,459,600

Cost of goods completed and transferred outduring October from the Testing Departmentto Finished Goods inventory

17-25

SOLUTION EXHIBIT 17-33ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing,Testing Department of Larsen Company for October 2009.



Units Transferred-in

CostsDirect

MaterialsConversion

CostsWork in process, beginning (given) 7,500Transferred in during current period (given) 22,500To account for 30, 0 00 Completed and transferred out during current period 26,300 26,300 26,300 26,300Work in process, ending* (given) 3,700 3,700 100%; 3,700 0%; 3,700 60% 3,700 0

2,220Accounted for 30, 0 00 Work done to date 30, 0 00 26,300 28,5 2 0


17-26

SOLUTION EXHIBIT 17-33BSteps 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;Weighted-Average Method of Process Costing,Testing Department of Larsen Company for October 2009.

TotalProduction

CostsTransferred

-in Costs Direct Materials

ConversionCosts

(Step 3)Work in process, beginning (given) $ 3,767,960 $ 2,932,500 $ 0 $ 835,460Costs added in current period (given) 21, 378 , 100 7, 717 , 500 9,7 04 , 7 00 3,9 55 , 9 00

Total costs to account for $ 2 5 , 146 , 060 $ 10, 650 , 000 $ 9,7 04 , 7 00 $ 4,7 91 , 36 0

(Step 4) Costs incurred to date $10,650,000 $9,704,700 $4,791,360Divide by equivalent units of work done to date (Solution Exhibit 17-33A) 30 ,00 0 26,30 0 28,52 0 Equivalent unit costs of work done to date $ 355 $ 369 $ 168

(Step 5)Assignment of costs:Completed and transferred out (26,300 units) $23,459,600 (26,300* $355) + (26,300* $369) + (26,300* $168)Work in process, ending (3,700 units) 1,6 86 , 460 ( 3 , 7 00 † $355) + (0 † $369) + ( 2 , 2 20 † $168)

Total costs accounted for $25,146,060 $ 10,4 29 , 500 + $ 9,7 04 , 7 00 + $ 4,7 91 , 36 0

*Equivalent units completed and transferred out from Solution Exhibit 17-33A, Step 2.†Equivalent units in ending work in process from Solution Exhibit 17-33A, Step 2.

17-27

17-34 (30 min.) Transferred-in costs, FIFO method (continuation of 17-33).

1. As explained in Problem 17-33, requirement 1, transferred-in costs are 100% complete and direct materials are 0% complete in both beginning and ending work-in-process inventory.

2. The equivalent units of work done in October 2009 in the Testing Department for transferred-in costs, direct materials, and conversion costs are calculated in Solution Exhibit 17-34A.

3. Solution Exhibit 17-34B 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 transferred-in 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 7,735,250

Work in Process––Assembly Department 7,735,250Cost of goods completed and transferred out during October from the Assembly Dept. to the Testing Dept.

b. Finished Goods 23,463,766 Work in Process––Testing Department 23,463,766Cost of goods completed and transferred out during October from the Testing Department to Finished Goods inventory.

17-28

SOLUTION EXHIBIT 17-34ASteps 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.

(Step 1)(Step 2)

Equivalent Units


UnitsTransferred-

in CostsDirect

MaterialsConversion

CostsWork in process, beginning (given)Transferred-in during current period (given)To account for

7,50022,500 30, 0 00


Completed and transferred out during current period:

From beginning work in process§

7,500(100% 100%); 7,500(100% 0%); 7,500(100% 70%)

7,500

0 7,500 2,250Started and completed

18,800 100%; 18,800100%; 18,800100%18,800†

18,800 18,800 18,800Work in process, ending* (given)3,700100%; 3,7000%; 3,70060%

3,700______ 3,700 0 2,220

Accounted for 30, 0 00 _____ ______ Work done in current period only 22,500 26,300 23, 27 0

§ Degree of completion in this department: Transferred-in 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 work-in-process inventory.*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.

17-29

SOLUTION EXHIBIT 17-34BSteps 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.

TotalProduction

CostsTransferred-in

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $ 3,717,335 $ 2,881,875 $ 0 $ 835,460

Costs added in current period (given) 21, 395 , 850 7,735,250 9,7 04 , 700 3,9 55 , 900 Total costs to account for $ 2 5 , 113 , 185 $10 , 617 , 125 $ 9,7 04 , 7 00 $ 4,7 91 , 360

(Step 4) Costs added in current period $ 7,735,250 $9,704,700 $3,955,900Divide by equivalent units of work done in current period (Solution Exhibit 17-34A) 22 , 5 00 26 , 3 00 23 ,270

Cost per equiv. unit of work done in current period $ 343.79 $ 369.00 $ 170.00

(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 $ 3,717,335

3,15 0 , 0 00

$2,881,875 + $0 + $835,460(0* $343.79) + (7,500* $369.00) + (2,250*

$170.00) Total from beginning inventory

Started and completed (18,800 units)Total costs of units completed & transferred out

Work in process, ending (3,700 units)

6,867,335 16, 596,431 23,463,766 1, 649,419

(18,800† $343.79)+(18,800† $369.00)+(18,800†

$170.00)

( 3 , 7 00 # $343.79) + (0 # $369.00) + (2 , 2 20 # $170.00)

Total costs accounted for $ 2 5 , 113 , 185 $10,617,125 + $9,704,700 + $4,791,360


17-30

17-35 (25 min.) Weighted-average method.

Solution Exhibit 17-35A shows equivalent units of work done to date of:

Direct materials 625 equivalent unitsConversion costs 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 17-35B 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 weighted-average method.

SOLUTION EXHIBIT 17-35ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing, Assembly Department of Porter Handcraft for April 2009.


Physical Direct ConversionFlow of Production Units Materials Costs

Work in process, beginning (given) 75Started during current period (given) 550To account for 625Completed and transferred out during current period 500 500 500Work in process, ending* (given) 125 125 100%; 125 20% 125 25Accounted for 625 Work done to date 625 5 25


17-31

SOLUTION EXHIBIT 17-35BSteps 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;Weighted-Average Method of Process Costing, Assembly Department of Porter, April 2009.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $ 1,910 $ 1,775 $ 135

Costs added in current period (given) 28, 490 17, 6 00 10, 890 Total costs to account for $ 30, 400 $ 19,375 $ 11, 025

(Step 4) Costs incurred to date $19,375 $11,025Divide by equivalent units of work done to date (Solution Exhibit 17-35A) 625 5 25

Cost per equivalent unit of work done to date $ 31 $ 21

(Step 5) Assignment of costs:Completed and transferred out (500 units) $26,000 (500* $31) + (500* $21)Work in process, ending (125 units) 4, 400 ( 125 † $31) + ( 25 † $ 21) Total costs accounted for $ 30, 400 $ 19,375 + $ 11, 025


17-32

17-36 (5–10 min.) Journal entries (continuation of 17-35).

1. Work in Process–– Assembly Department 17,600Accounts Payable 17,600

To record direct materials purchased andused in production during April

2. Work in Process–– Assembly Department 10,890Various Accounts 10,890

To record Assembly Department conversioncosts for April

3. Work in Process––Finishing Department 26,000Work in Process–– Assembly Department 26,000

To record cost of goods completed and transferred out in April from the Assembly Departmentto the Finishing Department

Work in Process –– Assembly Department Beginning inventory, April 1 1,910 3. Transferred out to1. Direct materials 17,600 Work in Process––Finishing 26,000

2. Conversion costs 10, 890 Ending inventory, April 30 4,400

17-33

17-37 (20 min.) FIFO method (continuation of 17-35).

The equivalent units of work done in April 2009 in the Assembly Department for direct materials and conversion costs are shown in Solution Exhibit 17-37A.

Solution Exhibit 17-37B 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:

Beginning Inventory


(Calculated Under FIFO Method)

Direct materialsConversion costs

$23.67 ($1,775 75)$4.50 ($135 30)

$32$22

The following table summarizes the costs assigned to units completed and those still in process under the weighted-average and FIFO process-costing methods for our example.


Exhibit 17-35B)

FIFO(Solution


$26,000 4, 400 $ 30, 400

$25,850 4, 550 $ 30, 400

–$150+$150

The FIFO ending inventory is higher than the weighted-average ending inventory by $150. This is because FIFO assumes that all the lower-cost prior-period units in work in process are the first to be completed and transferred out while ending work in process consists of only the higher-cost current-period units. The weighted-average method, however, smoothes out cost per equivalent unit by assuming that more of the higher-cost units are completed and transferred out, while some of the lower-cost units in beginning work in process are placed in ending work in process. Hence, in this case, the weighted-average method results in a higher cost of units completed and transferred out and a lower ending work-in-process inventory relative to the FIFO method.

17-34

SOLUTION EXHIBIT 17-37ASteps 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.

(Step 1)



UnitsDirect

MaterialsConversion


7555 0 625



75(100% 100%); 75(100% 40%)75

0 45Started and completed 425 100%; 425 100%

425†

425 425Work in process, ending* (given)

125 100%; 125 20%125 125 25

Accounted for 625 Work done in current period only 550 495

§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 work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 20%.SOLUTION EXHIBIT 17-37BSteps 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.

TotalProduction

CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $ 1,910 $ 1,775 $ 135

Costs added in current period (given) 28, 490 17, 6 00 10, 890 Total costs to account for $ 30, 400 $19,375 $11,025(Step 4) Costs added in current period $17,600 $10,890

Divide by equivalent units of work done in current period (Exhibit 17-37A) 550 495 Cost per equivalent unit of work done in current period $ 32 $ 22

(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

$ 1,910

9 90

$1,775 + $135

(0* $32) + (45* $22) 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

2,900 22, 950 25,850 4, 550 $ 30, 400

(425† $32) + (425† $22)

( 125 # $32) + ( 25 # $22) $19,375 + $11,025


17-35

17-38 (30 min.) Transferred-in costs, weighted average.

1. Solution Exhibit 17-38A computes the equivalent units of work done to date in the Binding Department for transferred-in costs, direct materials, and conversion costs.

Solution Exhibit 17-38B summarizes total Binding Department costs for April 2009, calculates the cost per equivalent unit of work done to date in the Binding Department for transferred-in 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 weighted-average method.

2. Journal entries:a. Work in Process–– Binding Department 144,000

Work in Process––Printing Department 144,000Cost of goods completed and transferred out

during April from the Printing Departmentto the Binding Department

b. Finished Goods 249,012Work in Process–– Binding Department 249,012

Cost of goods completed and transferred outduring April from the Binding Departmentto Finished Goods inventory

SOLUTION EXHIBIT 17-38ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing,Binding Department of Publish, Inc. for April 2009.



UnitsTransferred-

in CostsDirect

MaterialsConversion

CostsWork in process, beginning (given) 900Transferred-in during current period (given) 2,7 00 To account for 3,6 00 Completed and transferred out during current period: 3,000 3,000 3,000 3,000Work in process, endinga (given) 600 (600 100%; 600 0%; 600 60%) 600 0 360Accounted for 3,6 00 Work done to date 3,6 00 3 ,000 3,36 0

aDegree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.

17-36

SOLUTION EXHIBIT 17-38BSteps 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;Weighted-Average Method of Process Costing,Binding Department of Publish, Inc. for April 2009.

Total Production

CostsTransferred-in

CostsDirect

MaterialsConversion

Costs

(Step 3) Work in process, beginning (given) $ 47,775 $ 32,775 $ 0 $15,000 Costs added in current period (given) 239,7 00 144 ,000 26,7 00 69 ,000 Total costs to account for $ 287,475 $1 76,775 $ 26,7 00 $ 84 ,000

(Step 4) Costs incurred to date $176,775 $26,700 $84,000Divide by equivalent units of work done to date (Solution Exhibit 17-38A) ÷ 3,6 00 ÷ 3 ,000 ÷ 3,36 0 Cost per equivalent unit of work done to date $ 49.104 $ 8.90 $ 25

(Step 5) Assignment of costs:Completed and transferred out (3,000 units) $249,012 (3,000a × $49.104) + (3,000a × $8.90) + (3,000a × $25) Work in process, ending (600 units): 38,463 ( 6 00 b × $49.104) + (0 b × $8.90) + ( 36 0 b × $25)

Total costs accounted for $ 287,475 $1 76,77

5 + $ 26,7 00 + $ 84 ,000

a Equivalent units completed and transferred out from Sol. Exhibit 17-38A, step 2.b Equivalent units in ending work in process from Sol. Exhibit 17-38A, step 2.

17-37

17-39 (30 min.) Transferred-in costs, FIFO method (continuation of 17-38).

1. Solution Exhibit 17-39A calculates the equivalent units of work done in April 2009 in the Binding Department for transferred-in costs, direct materials, and conversion costs.

Solution Exhibit 17-39B 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 transferred-in 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 141,750

Work in Process––Printing Department 141,750Cost of goods completed and transferred out during April from the Printing Department to the Binding Department.

b. Finished Goods 240,525 Work in Process–– Binding Department 240,525Cost of goods completed and transferred out

during April from the Binding Departmentto Finished Goods inventory.

2. The equivalent units of work done in beginning inventory is: Transferred-in 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:

Beginning Inventory


Transferred-in costs (weighted average)Transferred-in costs (FIFO)Direct materialsConversion costs

$36.42 ($32,775 900)$30.95 ($27,855 900)

—$41.67 ($15,000 360)

$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 weighted-average and FIFO process-costing methods for the Binding Department.


Exhibit 17-38B)

FIFO(Solution


$249,012 38,463 $ 287,475

$240,525 39 , 780 $ 280,305

–$8,487 +$1,317

17-38

The FIFO ending inventory is higher than the weighted-average ending inventory by $1,317. This is because FIFO assumes that all the lower-cost prior-period units in work in process (resulting from the lower transferred-in costs in beginning inventory) are the first to be completed and transferred out while ending work in process consists of only the higher-cost current-period units. The weighted-average method, however, smoothes out cost per equivalent unit by assuming that more of the higher-cost units are completed and transferred out, while some of the lower-cost units in beginning work in process are placed in ending work in process. Hence, in this case, the weighted-average method results in a higher cost of units completed and transferred out and a lower ending work-in-process 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 work-in-process inventory (+$1,317). This is because the FIFO and weighted-average methods result in different values for transferred-in costs with respect to both beginning inventory and costs transferred in during the period.

SOLUTION EXHIBIT 17-39ASteps 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.



UnitsTransferred-in

CostsDirect

MaterialsConversion

CostsWork in process, beginning (given) 900 (work done before current period)Transferred-in during current period (given) 2,7 00

To account for 3,6 00

Completed and transferred out during current period: From beginning work in processa 900 [900 (100% – 100%); 900 (100% – 0%); 900 (100% – 40%)] 0 900 540 Started and completed 2,100b

(2,100 100%; 2,100 100%; 2,100 100%) 2,100 2,100 2,100Work in process, endingc (given) 600 (600 100%; 600 x 0%; 600 60%) ____ 600 0 360

Accounted for 3,6 00 ____ ____ ____

Work done in current period only 2,7 00 3 ,000 3 ,000

a Degree of completion in this department: Transferred-in 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

work-in-process inventory.c Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.

17-39

SOLUTION EXHIBIT 17-39BSteps 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.

Total Production

Costs Transferred-in Costs Direct

MaterialsConversion

Costs (Step 3) Work in process, beginning (given) $ 42,855 $ 27,855 $ 0 $15,000

Costs added in current period (given) 237,450 141,750 26,7 00 69 ,000 Total costs to account for $ 280,305 $169,605 $26,700 $84,000

(Step 4) Costs added in current period $141,750 $26,700 $69,000 Divide by equivalent units of work done in current period (Sol. Exhibit 17-39A) ÷ 2,7 00 ÷ 3 ,000 ÷ 3 ,000 Cost per equivalent unit of work done in current period $ 52.50 $ 8.90 $ 23.00

(Step 5) Assignment of costs:Completed and transferred out (3,000 units) Work in process, beginning (900 units) $ 42,855 $27,855 + $0 + $15,000 Costs added to beginning work in process in current period 20,43 0 (0a × $52.50) + (900a × $8.90) + (540a × $23) Total from beginning inventory 63,285 Started and completed (2,100 units) 1 77,24 0 (2,100b × $52.50) + (2,100b × $8.90) + (2,100b × $23) Total costs of units completed and transferred out 240,525Work in process, ending (600 units): 39,78 0 ( 6 00 c × $52.50) + (0 c × $8.90) + ( 36 0 c × $23) Total costs accounted for $ 280,305 $169,605 + $26,700 + $84,000

a Equivalent units used to complete beginning work in process from Solution Exhibit 17-39A, step 2. b Equivalent units started and completed from Solution Exhibit 17-39A, step 2. c Equivalent units in ending work in process from Solution Exhibit 17-39A, step 2.

17-40

17-40 (45 min.) Transferred-in costs, weighted-average and FIFO methods.

1. Solution Exhibit 17-40A computes the equivalent units of work done to date in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs. Solution Exhibit 17-40B 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 transferred-in 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 weighted-average method.

2. Solution Exhibit 17-40C computes the equivalent units of work done in week 37 in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs. Solution Exhibit 17-40D 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 transferred-in 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 17-40ASteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.

(Step 1) (Step 2) Equivalent Units


Units Transferred-

in CostsDirect

MaterialsConversion

CostsWork in process, beginning (given) 1,250Transferred in during current period (given) 5,000To account for 6,250Completed and transferred out during current period 5,250 5,250 5,250 5,250Work in process, ending* (given) 1,000 1,000 100%; 1,000 0%; 1,000 40% 1,000 0

400Accounted for 6,250 Work done to date 6,250 5,250 5,650


17-41

SOLUTION EXHIBIT 17-40BSteps 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;Weighted-Average Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.

TotalProduction

CostsTransferred

-in CostsDirect

MaterialsConversion

Costs(Step 3) Work in process, beginning (given) $ 38,060 $ 29,000 $ 0 $ 9,060

Costs added in current period (given) 159,600 96,000 25,200 38,400 Total costs to account for $197,660 $125,000 $25,200 $47,460

(Step 4) Costs incurred to date $125,000 $25,200 $47,460Divide by equivalent units of work done to date (Solution Exhibit 17-40A) 6,250 5,250 5,650 Equivalent unit costs of work done to date $ 20 $ 4.80 $ 8 .40

(Step 5) Assignment of costs:Completed and transferred out (5,250 units)

$174,300 (5,250* $20) + (5,250* $4.80) + (5,250* $8.40)

Work in process, ending (1,000 units) 23,360 (1,000 † $20) + (0 † $4.80) + (400 † $8.40)

Total costs accounted for $197,660 $125,000 + $25,200 + $47,460


17-42

SOLUTION EXHIBIT 17-40CSteps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.

(Step 1)(Step 2)

Equivalent Units


UnitsTransferred-

in CostsDirect

MaterialsConversion

CostsWork in process, beginning (given)Transferred-in during current period (given)To account for

1,2505,000 6,250



1,250(100% 100%); 1,250(100% 0%); 1,250(100% 80%)

1,250

0 1,250 250Started and completed4,000100%; 4,000100%; 4,000100%

4,000†

4,000 4,000 4,000Work in process, ending* (given)

1,000100%; 1,0000%; 1,00040%1,000 1,000 0 400

Accounted for 6,250 Work done in current period only 5,000 5,250 4,650

§Degree of completion in this department: Transferred-in 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 work-in-process inventory.*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.

17-43

SOLUTION EXHIBIT 17-40DSteps 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 Frito-Lay Inc. for Week 37.

TotalProduction Costs

Transferred-in Costs

Direct Materials

ConversionCosts

(Step 3) Work in process, beginning (given) $ 37,980 $ 28,920 $ 0 $ 9,060 Costs added in current period (given) 157,600 94,000 25,200 38,400 Total costs to account for $195,580 $122,920 $25,200 $47,460

(Step 4) Costs added in current period $ 94,000 $25,200 $38,400Divide by equivalent units of work done in current period (Solution Exhibit 17-40C) 5,000 5,250 4,650 Cost per equivalent unit of work done in current period $ 18.80 $ 4.80 $ 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

$ 37,980 8,065

$28,920 + $0 + $9,060(0* $18.80) + (1,250* $4.80) + (250* $8.258)

Total from beginning inventory Started and completed (4,000 units)Total costs of units completed & transferred outWork in process, ending (1,000 units)Total costs accounted for

46,045 127,432 173,477 22,103 $195,580

(4,000† $18.80) + (4,000† $4.80) + (4,000† $8.258)

(1,000 # $18.80) + (0 # $4.80) + (400 # $8.258) $122,920 + $25,200 $47,460

(Step 3)*Equivalent units used to complete beginning work in process from Solution Exhibit 17-40C, Step 2.†Equivalent units started and completed from Solution Exhibit 17-40C, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-40C, Step 2.

17-44

17-41 (30-35 min.) Weighted-average and standard-costing method.

1. Solution Exhibit 17-41A 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 17-41B 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 17-41ASteps 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 1)



UnitsDirect

MaterialsConversion

Costs


25,000126 ,250 151 , 25 0



25,000 (100% 100%); 25,000 (100% – 75%) 25,000

0 6,250Started and completed 100,000 100%, 100,000 100%

100,000†

100,000 100,000Work in process, ending* (given) 26,250 100%; 26,250 50%

26,250_______ 26,250 13,125

Accounted for 151 , 25 0 _______ _______Work done in current period only 126 ,250 119 , 375

§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 work-in-process inventory.


17-45

SOLUTION EXHIBIT 17-41BSteps 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,Paquita’s Pearls Company for the month ended November 30, 2010.

TotalProduction

CostsDirect

MaterialsConversion

Costs (Step 3) Work in process, beginning (given) $ 250,000 $ 62,500 + $ 187,500

Costs added in current period at standard costs 1,509,375 ( 126 ,250 2.50) + ( 119 , 375 $10.00)

Total costs to account for $ 1,759 , 375 $378,125 + $1,381,250

(Step 4) Standard cost per equivalent unit (given) $ 2.50 $ 10.00(Step 5) Assignment of costs at standard costs:

Completed and transferred out (125,000 units):Work in process, beginning (25,000 units)

Costs added to beg. work in process in current periodTotal from beginning inventory

$ 250,000 62 , 500

312,500

$62,500 + $187,500 (0* $2.50) + (6,250* $10.00)


1,250,000 1,562,500

(100,000† $2.50) + (100,000† $10.00)

Work in process, ending (26,250 units) 196 , 875 ( 26,250 # $2.50) + ( 1 3 ,125 # $10.00)

Total costs accounted for $ 1 , 7 5 9 , 375 $378,125 + $1,381,250Summary of variances for current performance:Costs added in current period at standard costs (see Step 3 above)Actual costs incurred (given)Variance

$315,625 32 7 ,500 $ 11,875 U

$1,193,750 1,207,415 $ 13 , 665 U

*Equivalent units to complete beginning work in process from Solution Exhibit 17-41A, Step 2.†Equivalent units started and completed from Solution Exhibit 17-41A, Step 2.

#Equivalent units in ending work in process from Solution Exhibit 17-41A, Step 2.

17-46

17-42 (25-30 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.

BudgetedConversion

Cost

BudgetedPairs ofShoes

Conversion Cost per Pair

of ShoesOperation 1 $145,125 32,250 $4.50Operation 2 58,050 32,250 1.80Operation 3 4,275 2,250 1.90Operation 4 67,725 32,250 2.10Operation 5 13,500 30,000 0.45Operation 6 2,025 2,250 0.90

2. Work Order Work Order

10399 10400Shoe type: Basic ElaborateQuantity: 1,000 150Direct Materials $13,000 $4,200Operation 1 4,500 675Operation 2 1,800 270Operation 3 0 285Operation 4 2,100 315Operation 5 450 0Operation 6 0 135Total $21,850 $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 Total cost: $5,880Divided by number of Divided by number of pairs of shoes: ÷ 1,000 pairs of shoes: ÷ 150Cost per pair of plain shoes: $ 21.85 Cost per pair of fancy shoes: $39.20

17-47

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