17 CHAPTER PROCESS COSTING 17-1 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. 17-2 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. 17-3 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. 17-4 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. 17-5 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. 17-6 Three inventory methods associated with process costing are: Weighted average. First-in, first-out. Standard costing.
17-7 The weighted-average process-costing method calculates the equivalent-unit 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 work-in-process inventory.
17-
17-8 FIFO computations are distinctive because they assign the cost of the previous accounting periods equivalent units in beginning work-in-process 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 work-in-process inventory. In contrast, the weighted-average method costs units completed and transferred out and in ending work in process at the same average cost. 17-9 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. 17-10 A major advantage of FIFO is that managers can judge the performance in the current period independently from the performance in the preceding period. 17-11 The journal entries in process costing are basically similar to those made in job-costing systems. The main difference is that, in process costing, there is often more than one work-inprocess accountone for each process. 17-12 Standard-cost procedures are particularly appropriate to process-costing 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. Standard-cost procedures also avoid the intricacies involved in detailed tracking with weighted-average or FIFO methods when there are frequent price variations over time. 17-13 There are two reasons why the accountant should distinguish between transferred-in 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 transferred-in items and materials added in the department. 17-14 No. Transferred-in 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. 17-15 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 weighted-average 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 weighted-average or FIFO methods.
17-
17-16 (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 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 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 17-16A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Assembly Department of Nihon, Inc. for February 2009. (Step 1) Physical Units 0 10,000 10,000 9,000 1,000 10,000 10,000 9,500 (Step 2) Equivalent Units Direct Conversion Materials Costs
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
9,000 1,000
9,000 500
*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
17-
SOLUTION EXHIBIT 17-16B Compute Cost per Equivalent Unit, Assembly Department of Nihon, Inc. for February 2009. Total Production Direct Conversion Costs Materials Costs $1,548,000 $750,000 $798,000 10,000 $ 75 $ 9,500 84
(Step 3) Costs added during February Divide by equivalent units of work done in current period (Solution Exhibit 17-l6A) Cost per equivalent unit
17-17 (20 min.) Journal entries (continuation of 17-16). 1. Work in ProcessAssembly Accounts Payable To record $750,000 of direct materials purchased and used in production during February 2009 Work in ProcessAssembly 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 ProcessTesting Work in ProcessAssembly 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
2.
798,000 798,000
3.
1,431,000 1,431,000
Postings to the Work in ProcessAssembly account follow. Work in Process Assembly Department Beginning inventory, Feb. 1 0 3. Transferred out to 1. Direct materials 750,000 Work in ProcessTesting 2. Conversion costs 798,000 Ending inventory, Feb. 28 117,000
1,431,000
17-
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 17-18A 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 Units 0 50,000 50,000 35,000 15,000 (Step 2) Equivalent Units Chemical P Chemical Q Conversion Costs
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) 15,000 100%; 15,000 0%; 15,000 66 2/3% Accounted for Work done in current period only
35,000
35,000
35,000
15,000 50,000 50,000
0 35,000
10,000 45,000
*Degree of completion in this department: Chemical P, 100%; Chemical Q, 0%; conversion costs, 66 2/3%.
17-
SOLUTION EXHIBIT 17-18B 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 (Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 17-l8A) 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
$455,000 $455,000
Chemical P
$250,000 $250,000 $250,000
Chemical Q
$70,000 $70,000 $70,000
Conversion Costs
$135,000 $135,000 $135,000
50,000 $ 5
35,000 $ 2
45,000 $
3
$350,000 105,000 $455,000
(35,000* $5) + (35,000* $2) + (35,000* $3) (15,000 $5) + $250,000 + (0 $2) $70,000 + (10,000 $3) + $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 17-19 Steps 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 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%.
17-
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 17-20 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; Weighted-Average Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009.
Total Production Costs $ 584,400 4,612,000 $5,196,400 Direct Materials $ 493,360 3,220,000 $3,713,360 $3,713,360 $ 532 6,980 Conversion Costs $ 91,040 1,392,000 $1,483,040 $1,483,040 $ 2,990 496
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 17-19) Cost per equivalent unit of work done to date Assignment of costs: Completed and transferred out (460 units) Work in process, ending (120 units) Total costs accounted for
(Step 4)
(Step 5)
$4,586,200 610,200 $5,196,400
(460* $6,980) + (460* $2,990) (72 $6,980) + (36 $2,990) $3,713,360 + $1,483,040
*Equivalent
Equivalent
units completed and transferred out from Solution Exhibit 17-19, Step 2. units in work in process, ending from Solution Exhibit 17-19, Step 2.
17-
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 17-21 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. (Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
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
Degree 460
(Step 1) Physical Units 80 500 580
80 8 380 380 120 ___ 580 460 464 72 36 380 48
of completion in this department: direct materials, 90%; conversion costs, 40%. 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-
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 17-22 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.
Total Production Costs $ 584,400 4,612,000 $5,196,400 Direct Materials $ 493,360 3,220,000 $3,713,360 (Step 4) Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 17-21) 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
*Equivalent
Equivalent
(Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs to account for
Conversion Costs $ 91,040 1,392,000 $1,483,040
$3,220,000 460 $ 7,000
$1,392,000 464 $ 3,000
$ 584,400 200,000 784,400 3,800,000 4,584,400 612,000 $5,196,400
$493,360
+
$91,040
(8* $7,000) + (48* $3,000) (380 $7,000) + (380 $3,000) (72# $7,000) + (36# $3,000) $3,713,360 + $1,483,040
units used to complete beginning work in process from Solution Exhibit 17-21, Step 2. 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-
17-23 (20-25 min.) Standard-costing method, assigning costs. 1. SOLUTION EXHIBIT 17-23A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Standard Costing Method of Process Costing for Buckys Boxes for July 2010
(Step 1) Physical Units (Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
Flow of Production
Work in process, beginning (given) 185,000 Started during current period (given) 465,000 To account for 650,000 Completed and transferred out during current period: From beginning work in process 185,000 185,000 (100% 100%); 185,000 (100% 25%) Started and completed 327,000 327,000 100%, 327,000 100% Work in process, ending* (given) 138,000 138,000 100%; 138,000 80% _______ Accounted for 650,000 Work done in current period only
Degree 512,000
0 327,000 138,000 _______ 465,000
138,750 327,000 110,400 _______ 576,150
of completion in this department: direct materials, 100%; conversion costs, 25%. 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-
2. SOLUTION EXHIBIT 17-23B 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 Buckys Boxes for July 2010
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 $ 1.30 $ 2.10
(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 (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
$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 17-23A, Step 2.
Equivalent #Equivalent
units started and completed from Solution Exhibit 17-23A, Step 2. units in ending work in process from Solution Exhibit 17-23A, Step 2.
17-
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 17-24A Steps 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 1) Physical Units 12,500 50,000 62,500 42,500 20,000 62,500 62,500 52,500 (Step 2) Equivalent Units Direct Conversion Materials Costs
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
42,500 20,000
42,500 10,000
*Degree of completion: direct materials, 100%; conversion costs, 50%.
17-
SOLUTION EXHIBIT 17-24B 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; Weighted-Average Method of Process Costing, Bio Doc Corporation for July 2008.
Total Production Costs $162,500 813 ,750 $976,250 Direct Materials $ 75,000 350,000 $425,000 $425,000 62,500 $ 6.80 Conversion Costs $ 87,500 463,750 $551,250 $551,250 52,500 $ 10.50
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 17-24A) Cost per equivalent unit of work done to date Assignment of costs: Completed and transferred out (42,500 units) Work in process, ending (20,000 units) Total costs accounted for
(Step 4)
(Step 5)
$735,250 241,000 $976,250
(42,500* $6.80) + (42,500* $10.50) (20,000 $6.80) + (10,000 $10.50) $425,000 + $551,250
*Equivalent units completed and transferred out (given). Equivalent units in ending work in process (given).
17-
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 17-25A 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 1) Physical Units (Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
Flow of Production
Work in process, beginning (given) 12,500 Started during current period (given) 50,000 To account for 62,500 Completed and transferred out during current period: From beginning work in process 12,500 12,500 (100% 100%); 12,500 (100% 70%) Started and completed 30,000 30,000 100%, 30,000 100% Work in process, ending* (given) 20,000 20,000 100%; 20,000 50% Accounted for 62,500 Work done in current period only
Degree 42,500
0 30,000 20,000 50,000
3,750 30,000 10,000 43,750
of completion in this department: direct materials, 100%; conversion costs, 70%. 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-
SOLUTION EXHIBIT 17-25B 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. 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 added in current period Divide by equivalent units of work done in current period (Solution Exhibit 17-25A) 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)
Direct Materials $ 75,000 350,000 $425,000 $350,000 50,000 $ 7
Conversion Costs $ 87,500 463,750 $551,250 $463,750 43,750 $ 10.60
$162,500 39,750 202,250 528,000 730,250 246,000
$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
Total costs accounted for
$976,250
*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-
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 Conversion costs $20,000 U $8,750 U
SOLUTION EXHIBIT 17-26 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
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 $ 10.40
(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) $173,500 Costs added to beg. work in process in current period 39,000 Total from beginning inventory 212,500 Started and completed (30,000 units) 510,000 Total costs of units transferred out 722,500 Work in process, ending (20,000 units) 236,000 Total costs accounted for $958,500 Summary of variances for current performance: Costs added in current period at standard costs (see Step 3 above) Actual costs incurred (given) Variance
(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 $455,000 463,750 $ 8,750 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-
17-27 (3540 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 17-27A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units Weighted-Average Method of Process Costing; Finishing Department of Asaya Clothing for June 2009.
(Step 1) Physical Units (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs
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
75 135 210 150 60 210 210 150 195 150 60 150 0 150 45
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.
17-
SOLUTION EXHIBIT 17-27B 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; Weighted-Average Method of Process Costing, Finishing Department of Asaya Clothing for June 2009. Total Production Costs $105,000 258,000 $363,000
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 17-27A) Cost per equivalent unit of work done to date Assignment of costs: Completed and transferred out (150 units) Work in process, ending (60 units): Total costs accounted for
Transferred-in Costs $ 75,000 142,500 $ 217,500 $ 217,500 210 $1,035.71
Direct Materials $ 0 37,500 $37,500 $37,500 $ 150 250
Conversion Costs $ 30,000 78,000 $108,000 $108,000 195 $ 553.85
(Step 4)
(Step 5)
$275,934 87,066 $363,000
(150 a $1,035.71) + (150 a $250) + (150a $553.85) (60b $1,035.71) + (0b $250) + (45b $553.85)
$ 217,500
+
$37,500
+
$108,000
a b
Equivalent units completed and transferred out from Sol. Exhibit 17-27, step 2. Equivalent units in ending work in process from Sol. Exhibit 17-27A, step 2.
17-
17-28 (3540 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-inprocess 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 workin-process inventory. SOLUTION EXHIBIT 17-28A 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.
Flow of Production Work in process, beginning (given) Transferred-in during current period (given) To account for Completed and transferred out during current period: From beginning work in processa [75 (100% 100%); 75 (100% 0%); 75 (100% 60%)] Started and completed (75 100%; 75 100%; 75 100%) Work in process, endingc (given) (60 100%; 60 0%; 60 75%) Accounted for Work done in current period only
aDegree b150
(Step 2) Equivalent Units Physical Transferred-in Direct Conversion Units Costs Materials Costs 75 (work done before current period) 135 210
(Step 1)
75 0 75b 75 60 ___ 210 60 ___ 135 0 ___ 150 45 ___ 150 75 75 75 30
of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%. 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-
SOLUTION EXHIBIT 17-28B 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.
Total Production Costs $ 90,000 246,300 $336,300
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs added in current period Divide by equivalent units of work done in current period (Solution Exhibit 17-28A) Cost per equivalent unit of work done in current period 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
Transferred-in Direct Materials Conversion Costs Costs $ 60,000 $ 0 $ 30,000 130,800 37,500 78,000 $190,800 $37,500 $108,000 $130,800 135 $ 968.89 $37,500 $ 150 250 $ 78,000 $ 150 520
(Step 4)
(Step 5)
$ 90,000 34,350 124,350 130,416 254,766 81,534 $336,300
$ 60,000 (0a $968.89)
$ 0 + (75a $250)
$ 30,000 + (30 a $520) + (75b $520) + (45c $520) + $108,000
(75b $968.89) + (75b $250) (60c $968.89) + (0c $250) $190,800 + $37,500
a Equivalent
units used to complete beginning work in process from Solution Exhibit 17-28A, step 2. 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.
b Equivalent
17-
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 (965,000434,250) = 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-
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 Conversion costs 25,000 equivalent units 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 weightedaverage method. SOLUTION EXHIBIT 17-30A Steps 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. (Step 1) Physical Units 5,000 20,000 25,000 22,500 2,500 25,000 25,000 24,250 (Step 2) Equivalent Units Direct Conversion Materials Costs
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
22,500 2,500
22,500 1,750
*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
17-
SOLUTION EXHIBIT 17-30B 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; Weighted-Average Method of Process Costing, Assembly Department of Larsen Company, for October 2009.
Total Production Direct Costs Materials $1,652,750 $1,250,000 6,837,500 4,500,000 $8,490,250 $5,750,000 $5,750,000 $ 25,000 230 Conversion Costs $ 402,750 2,337,500 $2,740,250 $2,740,250 $ 24,250 113
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 17-30A) Cost per equivalent unit of work done to date Assignment of costs: Completed and transferred out (22,500 units) Work in process, ending (2,500 units) Total costs accounted for
(Step 4)
(Step 5)
$7,717,500 772,750 $8,490,250
(22,500* $230) + (22,500* $113) (2,500 $230) + (1,750 $113) $6,150,000 + $2,619,000
*Equivalent Equivalent
units completed and transferred out from Solution Exhibit 17-30A, Step 2. 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 ProcessAssembly Department Accounts Payable Direct materials purchased and used in production in October. Work in ProcessAssembly Department Various accounts Conversion costs incurred in October. 4,500,000 4,500,000
2.
2,337,500 2,337,500
3.
Work in ProcessTesting Department 7,717,500 Work in ProcessAssembly Department 7,717,500 Cost of goods completed and transferred out in October from the Assembly Department to the Testing Department. Work in ProcessAssembly Department Beginning inventory, October 1 1,652,750 3. Transferred out to 1. Direct materials 4,500,000 Work in ProcessTesting 2. Conversion costs 2,337,500 Ending Inventory, October 31 772,750
7,717,500
17-
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 $250.00 ($1,250,000 5,000 equiv. units) 134.25 ($ 402,750 3,000 equiv. units) $384.25 Work Done in Current Period $225.00 110.00 $335.00 Conversion Costs $113* $110**
Direct materials Conversion costs Total cost per unit
Cost per equivalent unit (weighted-average) Cost per equivalent unit (FIFO)
*from Solution **from
Direct Materials $230* $225**
Exhibit 17-30B 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 under process the weighted-average and FIFO process-costing methods for our example. Weighted Average FIFO (Solution (Solution Exhibit 17-30B) Exhibit 17-32B) 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
17-
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 17-32A 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) Physical Units 5,000 20,000 25,000 Completed and transferred out during current period: From beginning work in process 5,000 (100% 100%); 5,000 (100% 60%) Started and completed 17,500 100%, 17,500 100% Work in process, ending* (given) 2,500 100%; 2,500 70% Accounted for Work done in current period only
Degree 22,500
Flow of Production Work in process, beginning (given) Started during current period (given) To account for
(Step 2) Equivalent Units Direct Conversion Materials Costs
(work done before current period)
5,000 17,000 2,500 _____ 25,000
0 17,500 2,500
2,000 17,500 1,750 ______ 21,250
20,000
of completion in this department: direct materials, 100%; conversion costs, 60%. 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-
SOLUTION EXHIBIT 17-32B 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. 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 added in current period Divide by equivalent units of work done in current period (Solution Exhibit 17-32A) 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
Direct Materials $1,250,000 4,500,000 $5,750,000 $4,500,000 20,000 $ 225
Conversion Costs $ 402,750 2,337,500 $2,740,250 $2,337,500 $ 21,250 110
$1,652,750 220,000 1,872,750 5,862,500 7,735,250 755,000 $8,490,250
$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
*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-
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 ProcessTesting Department Work in ProcessAssembly Department Cost of goods completed and transferred out during October from the Assembly Department to the Testing Department b. Finished Goods Work in ProcessTesting Department Cost of goods completed and transferred out during October from the Testing Department to Finished Goods inventory
7,717,500 7,717,500
23,459,600 23,459,600
17-
SOLUTION EXHIBIT 17-33A Steps 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. (Step 1) Physical Units (Step 2) Equivalent Units TransferredDirect Conversio in Materials n Costs Costs
Flow of Production
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
26,300 3,700
26,300 0
26,300 2,220
30,000
26,300
28,520
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
17-
SOLUTION EXHIBIT 17-33B 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; Weighted-Average Method of Process Costing, Testing Department of Larsen Company for October 2009. Total Production Costs $ 3,767,960 21,378,100 $25,146,060
(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 17-33A) 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
Transferred -in Costs $ 2,932,500 7,717,500 $10,650,000 $10,650,000 30,000 $ 355
Direct Materials $ 0 9,704,700 $9,704,700 $9,704,700 $ 26,300 369
Conversion Costs $ 835,460 3,955,900 $4,791,360 $4,791,360 28,520 $ 168
$23,459,600 1,686,460 $25,146,060
(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
*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-
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 1734A. 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 ProcessTesting Department Work in ProcessAssembly Department Cost of goods completed and transferred out during October from the Assembly Dept. to the Testing Dept. b. Finished Goods Work in ProcessTesting Department Cost of goods completed and transferred out during October from the Testing Department to Finished Goods inventory.
7,735,250 7,735,250
23,463,766 23,463,766
17-
SOLUTION EXHIBIT 17-34A 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.
(Step 2) (Step 1) Equivalent Units Physical TransferredDirect Conversion Units in Costs Materials Costs 7,500 (work done before current period) 22,500 30,000
Flow of Production Work in process, beginning (given) Transferred-in 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
Degree 26,300
7,500 0 18,800 18,800 3,700 ______ 30,000 3,700
18,800 0 18,800 2,220 7,500 2,250
22,500
__ ___ 26,300
______
23,270
of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 70%. 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-
SOLUTION EXHIBIT 17-34B 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.
Total Production Costs $ 3,717,335 21,395,850 $25,113,185
(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 (Solution Exhibit 17-34A) 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
Transferred-in Costs $ 2,881,875 7,735,250 $10,617,125 $ 7,735,250 $ 22,500 343.79
Direct Materials $ 0 9,704,700 $9,704,700 $9,704,700 $ 26,300 369.00
Conversion Costs $ 835,460 3,955,900 $4,791,360 $3,955,900 $ 23,270 170.00
$ 3,717,335 3,150,000 6,867,335 16,596,431 23,463,766 1,649,419 $25,113,185
$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 17-34A, Step 2. Equivalent units started and completed from Solution Exhibit 17-34A, Step 2. #Equivalent units in ending work in process from Solution Exhibit 17-34A, Step 2.
17-
17-35 (25 min.) Weighted-average method. Solution Exhibit 17-35A 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 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 17-35A Steps 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. (Step 1) Physical Units 75 550 625 500 125 625 625 525 (Step 2) Equivalent Units Direct Conversion Materials Costs
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
*Degree
500 125
500 25
of completion in this department: direct materials, 100%; conversion costs, 20%.
17-
SOLUTION EXHIBIT 17-35B 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; Weighted-Average Method of Process Costing, Assembly Department of Porter, April 2009.
Total Production Costs Direct Materials Conversion Costs
(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 17-35A) 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
*Equivalent Equivalent
$ 1,910 28,490 $30,400
$ 1,775 17,600 $19,375 $19,375 $ 31 625
$
135 10,890 $11,025 $11,025 $ 525 21
$26,000 4,400 $30,400
(500* $31) + (500* $21) (125 $31) + (25 $21) $19,375 + $11,025
units completed and transferred out from Solution Exhibit 17-35A, Step 2. units in ending work in process from Solution Exhibit 17-35A, Step 2.
17-
17-36 (510 min.)
Journal entries (continuation of 17-35). 17,600 17,600
1. Work in Process Assembly Department Accounts Payable To record direct materials purchased and used in production during April 2. Work in Process Assembly Department Various Accounts To record Assembly Department conversion costs for April 3. Work in ProcessFinishing 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
10,890 10,890
26,000 26,000
Work in Process Assembly Department Beginning inventory, April 1 1,910 3. Transferred out to 1. Direct materials 17,600 Work in ProcessFinishing 2. Conversion costs 10,890 Ending inventory, April 30 4,400
26,000
17-
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: Work Done in Current Period (Calculated Under FIFO Method) $32 $22
Direct materials Conversion costs
Beginning Inventory $23.67 ($1,775 75) $4.50 ($135 30)
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 FIFO (Solution (Solution Exhibit 17-35B) Exhibit 17-37B) Difference $26,000 $25,850 $150 4,400 4,550 +$150 $30,400 $30,400
Cost of units completed and transferred out Work in process, ending Total costs accounted for
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-
SOLUTION EXHIBIT 17-37A 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.
(Step 1) Physical Units 75 550 625 75 0 425 425 125 125 625 550 495 25 425 45 (Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
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
Degree 500
of completion in this department: direct materials, 100%; conversion costs, 40%. 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 17-37B 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.
Total Production Costs $ 1,910 28,490 $30,400 Direct Materials $ 1,775 17,600 $19,375 $17,600 $ 550 32 Conversion Costs $ 135 10,890 $11,025 $10,890 $ 495 22
(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 17-37A) 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) $ 1,910 Costs added to begin. work in process in current period 990 Total from beginning inventory 2,900 Started and completed (425 units) 22,950 Total costs of units completed & tsfd. out 25,850 Work in process, ending (125 units) 4,550 Total costs accounted for $30,400
$1,775 (0* $32) (425 $32)
+ + +
$135 (45* $22) (425 $22) (25# $22) $11,025
(125# $32) + $19,375 +
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-37A, Step 2. Equivalent units started and completed from Solution Exhibit 17-37A, Step 2. #Equivalent units in ending work in process from Solution Exhibit 17-37A, Step 2.
17-
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 Work in ProcessPrinting 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 17-38A Steps 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.
(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 (Step 1)
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, endinga (given) (600 100%; 600 0%; 600 60%) Accounted for Work done to date
aDegree
of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
17-
SOLUTION EXHIBIT 17-38B 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; Weighted-Average Method of Process Costing, Binding Department of Publish, Inc. for April 2009. Total Production Costs $ 47,775 239,700 $287,475
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 17-38A) Cost per equivalent unit of work done to date Assignment of costs: Completed and transferred out (3,000 units) Work in process, ending (600 units): Total costs accounted for
Transferred-in Costs $ 32,775 144,000 $176,775 $176,775 3,600 $ 49.104
Direct Materials $ 0 26,700 $26,700 $26,700 3,000 $ 8.90
Conversion Costs $15,000 69,000 $84,000 $84,000 3,360 $ 25
(Step 4)
(Step 5)
$249,012 38,463 $287,475
(3,000a $49.104) + (3,000a $8.90) + (3,000a $25) (600b $49.104) + (0b $8.90) + (360b $25)
$176,775
+ $26,700
+ $84,000
a Equivalent b Equivalent
units completed and transferred out from Sol. Exhibit 17-38A, step 2. units in ending work in process from Sol. Exhibit 17-38A, step 2.
17-
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 Work in ProcessPrinting 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: 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 $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
Transferred-in costs (weighted average) Transferred-in costs (FIFO) Direct materials Conversion costs
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. Weighted Average FIFO (Solution (Solution Exhibit 17-38B) Exhibit 17-39B) Difference $249,012 $240,525 $8,487 38,463 39,780 +$1,317 $287,475 $280,305
Cost of units completed and transferred out Work in process, ending Total costs accounted for
17-
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 17-39A 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 2) Equivalent Units Physical Transferred-in Direct Conversion Units Costs Materials Costs 900 (work done before current period) 2,700 3,600 900 (Step 1)
Flow of Production Work in process, beginning (given) Transferred-in during current period (given) To account for Completed and transferred out during current period: From beginning work in processa [900 (100% 100%); 900 (100% 0%); 900 Started and completed (2,100 100%; 2,100
(100% 40%)]
2,100b 600 ____ 3,600
0 2,100 600 ____ 2,700
900 2,100 0 ____ 3,000
540 2,100 360 ____ 3,000
100%; 2,100 100%)
Work in process, endingc (given) (600 100%; 600 x 0%; 600 60%) Accounted for Work done in current period only
a
b 3,000
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%. physical units completed and transferred out minus 900 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%.
c
17-
SOLUTION EXHIBIT 17-39B 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.
Total Production Costs $ 42,855 237,450 $280,305
(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 (Sol. Exhibit 17-39A) 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
Transferred-in Costs $ 27,855 141,750 $169,605 $141,750 2,700 $ 52.50
Direct Materials $ 0 26,700 $26,700 $26,700 3,000 $ 8.90
Conversion Costs $15,000 69,000 $84,000 $69,000 3,000 $ 23.00
$ 42,855 20,430 63,285 177,240 240,525 39,780 $280,305
$27,855 + (0a $52.50) +
$0 + $15,000 (900a $8.90) + (540a $23)
(2,100b $52.50) + (2,100b $8.90) + (2,100b $23) (600c $52.50) + $169,605 + (0c $8.90) + $26,700 (360c $23) + $84,000
Equivalent units used to complete beginning work in process from Solution Exhibit 17-39A, step 2. 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.
b
17-
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 17-40A Steps 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 Physical TransferredDirect Conversio Flow of Production Units in Costs Materials n 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: transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.
17-
SOLUTION EXHIBIT 17-40B 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; Weighted-Average Method of Process Costing, Drying and Packaging Department of Frito-Lay Inc. for Week 37. Total Production Costs $ 38,060 159,600 $197,660
(Step 3)
Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date (Solution Exhibit 17-40A) Equivalent unit costs of work done to date Assignment of costs: Completed and transferred out (5,250 units) Work in process, ending (1,000 units) Total costs accounted for
Transferred -in Costs $ 29,000 96,000 $125,000 $125,000 $ 6,250 20
Direct Conversion Materials Costs $ 0 $ 9,060 25,200 38,400 $25,200 $47,460 $25,200 5,250 $ 4.80 $47,460 5,650 $ 8.40
(Step 4)
(Step 5)
$174,300 23,360 $197,660
(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
*Equivalent
units completed and transferred out from Solution Exhibit 17-40A, Step 2. Equivalent units in ending work in process from Solution Exhibit 17-40A, Step 2.
17-
SOLUTION EXHIBIT 17-40C 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 Frito-Lay Inc. for Week 37.
(Step 1) Physical Units 1,250 5,000 6,250 1,250 0 4,000 4,000 1,000 1,000 6,250 5,000 5,250 4,650 0 400 4,000 4,000 1,250 250 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs (work done before current period)
Flow of Production Work in process, beginning (given) Transferred-in 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
Degree 5,250
of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 80%. 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-
SOLUTION EXHIBIT 17-40D 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 Frito-Lay Inc. for Week 37.
Total Production Costs $ 37,980 157,600 $195,580
(Step 3) Work in process, beginning (given)
Costs added in current period (given) Total costs to account for
Transferred Direct Conversion -in Costs Materials Costs $ 0 $ 9,060 $ 28,920 25,200 38,400 94,000 $25,200 $47,460 $122,920 $ 94,000 5,000 $ 18.80 $25,200 5,250 $ 4.80 $38,400 4,650 $ 8.258
(Step 4) Costs added in current period
Divide by equivalent units of work done in current period (Solution Exhibit 17-40C) Cost per equivalent unit of work done in current period
(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 (0* $28,920 + $0 + $9,060 * $4.80) + (250* $8.258) $18.80) + (1,250
(4,000 $18.80) + (4,000 $4.80) + (4,000 $8.258) (1,000# $18.80) + (0# $4.80) + $122,920 + $25,200 (400# $8.258) $47,460
(Step 3)
*Equivalent Equivalent
units used to complete beginning work in process from Solution Exhibit 17-40C, Step 2. 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-
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 Paquitas Pearls Company for direct materials and conversion costs. 2. and 3. Solution Exhibit 17-41B summarizes total costs of the Paquitas 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 17-41A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Standard Costing Method of Process Costing, Paquitas Pearls Company for the month ended November 30, 2010.
(Step 2) Equivalent Units Direct Conversion Materials Costs (work done before current period)
Flow of Production
(Step 1) Physical Units
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
Degree
25,000 126,250 151,250 25,000
0 100,000 100,000 26,250 _______ 151,250 26,250 _______ 126,250
6,250 100,000 13,125 _______ 119,375
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.
*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
17-
SOLUTION EXHIBIT 17-41B 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, Paquitas Pearls Company for the month ended November 30, 2010.
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 $ 2.50 $ 10.00
(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 (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
$62,500 (0* $2.50)
+ $187,500 + (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 $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 #Equivalent
units started and completed from Solution Exhibit 17-41A, Step 2. units in ending work in process from Solution Exhibit 17-41A, Step 2.
17-
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.
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
Operation 1 Operation 2 Operation 3 Operation 4 Operation 5 Operation 6 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): Total cost $21,850 Divided by number of pairs of shoes: 1,000 Cost per pair of plain shoes: $ 21.85 Work order 10400 (Elaborate shoes): Total cost: $5,880 Divided by number of pairs of shoes: 150 Cost per pair of fancy shoes: $39.20
17-