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
100 equivalent units
97 equivalent units
2. & 3. Solution Exhibit 17-30B calculates cost per equivalent unit of work done to date,
summarizes the total Assembly Department costs for October 2007, and assigns these costs to
units completed (and transferred out) and to units in ending work in process using the weightedaverage method.
SOLUTIO 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 Global Defense, Inc.,
for October 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
10 × 100%; 10 × 70%
Accounted for
Work done to date
Physical
Units
20
80
100
90
10
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
90
90
10
7
100
97
100
*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
17-1
SOLUTIO EXHIBIT 17-30B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing, Assembly Department of Global Defense,
Inc., for October 2007.
(Step 3)
(Step 4)
(Step 5)
*
†
Work in process, beginning (given)
Costs added in current period (given)
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
Total costs to account for
Assignment of costs:
Completed and transferred out (90 units)
Work in process, ending (10 units)
Total costs accounted for
Total
Production
Costs
$ 580,000
2,935,000
Direct
Materials
$ 460,000
2,000,000
$2,460,000
Conversion
Costs
$ 120,000
935,000
$1,055,000
100
24,600
÷
97
$10,876.29
÷
$
$3,515,000
$3,192,866
322,134
$3,515,000
(90* × $24,600) + (90* × $10,876.29)
(10† × $24,600) + (7† × $10,876.29)
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.
2.
3.
Work in Process––Assembly Department
Accounts Payable
Direct materials purchased and used in
production in October.
2,000,000
Work in Process––Assembly Department
Various accounts
Conversion costs incurred in October.
935,000
Work in Process––Testing Department
Work in Process––Assembly Department
Cost of goods completed and transferred out
in October from the Assembly Department
to the Testing Department.
2,000,000
935,000
3,192,866
Work in Process––Assembly Department
Beginning inventory, October 1
580,000 3. Transferred out to
1. Direct materials
2,000,000
Work in Process–Testing
2. Conversion costs
935,000
Ending Inventory, October 31
322,134
17-2
3,192,866
3,192,866
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 2007 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 2007 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
2007, and assigns these costs to units completed (and transferred out) and units in ending work in
process under the FIFO method.
The cost per equivalent unit of beginning inventory and of work done in the current
period differ:
Direct materials
Conversion costs
*
Beginning
Inventory
$23,000 ($460,000 ÷ 20 equiv. units)
$10,000 ($120,000 ÷ 12 equiv. units)
Cost per equivalent unit (weighted-average)
Cost per equivalent unit (FIFO)
Direct
Materials
$24,600*
$25,000**
Work Done in
Current Period
$25,000
$11,000
Conversion
Costs
$10,876.29*
$11,000**
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 to calculate the numerator of the calculation. FIFO uses only the costs added during the
period whereas weighted-average uses the costs from the beginning work-in-process as well as
costs added during the 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)
Cost of units completed and transferred out
$3,192,866
Work in process, ending
322,134
Total costs accounted for
$3,515,000
17-3
FIFO
(Solution
Exhibit 17-32B) Difference
$3,188,000
–$4,866
327,000
+$4,866
$3,515,000
The FIFO ending inventory is higher than the weighted-average ending inventory by
$4,866. 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. So, 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.
SOLUTIO 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 Global Defense Inc. for October 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out during current
period:
From beginning work in process§
20 × (100% − 100%); 20 × (100% − 60%)
Started and completed
70 ×100%, 70 × 100%
Work in process, ending* (given)
10 × 100%; 10 × 70%
Accounted for
Work done in current period only
§
Physical
Units
20
80
100
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
(work done before current period)
20
0
8
70
70
10
7
80
85
70†
10
100
Degree of completion in this department: direct materials, 100%; conversion costs, 60%.
90 physical units completed and transferred out minus 20 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
†
17-4
$ 580,000
88,000
668,000
2,520,000
3,188,000
327,000
$3,515,000
$3,515,000
17-5
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-32A, Step 2.
†
Equivelant units started and completed from Solution Exhibit 17-32A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-32A, Step 2.
Work in process, beginning ($460,000 + $120,000)
(Step 3) Costs added in current period (given)
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 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (90 units):
Work in process, beginning (20 units)
Costs added to beg. work in process in current period
Total from beginning inventory
Started and completed (70 units)
Total costs of units completed & transferred out
Work in process, ending (10 units)
Total costs accounted for
Total
Production
Costs
$ 580,000
2,935,000
Conversion
Costs
÷ 85
$ 11,000
÷ 80
25,000
(10# × $25,000) + (7# × $11,000)
(70† × $25,000) + (70† × $11,000)
(0* × $25,000) + (8* × $11,000)
$
$935,000
$2,000,000
(costs of work done before current period)
Direct
Materials
SOLUTIO EXHIBIT 17-32B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units
Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing, Assembly Department of Global Defense, Inc., for October 2007.
7-35
(25 min.) Weighted-average method.
Solution Exhibit 17-35A shows equivalent units of work done to date of:
Direct materials
Conversion costs
2,500 equivalent units
2,125 equivalent units
Note that direct materials are added when the Forming 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 calculates cost per equivalent unit of work done to date for
direct materials and conversion costs, summarizes the total Forming Department costs for April
2007, and assigns these costs to units completed (and transferred out), and to units in ending
work in process using the weighted-average method.
SOLUTIO EXHIBIT 17-35A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Forming Department of Star Toys for April
2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
500 × 100%; 500 × 25%
Accounted for
Work done to date
*
Physical
Units
300
2,200
2,500
2,000
500
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
2,000
2,000
500
125
2,500
2,125
2,500
Degree of completion in this department: direct materials, 100%; conversion costs, 25%.
17-6
SOLUTIO EXHIBIT 17-35B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing, Forming Department of Star Toys, April 2007.
Total
Production
Costs
(Step 3) Work in process, beginning (given)
Costs added in current period (given)
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 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (2,000 units)
Work in process, ending (500 units)
Total costs accounted for
*
†
$
9,625
112,500
Direct
Materials
Conversion
Costs
$ 7,500
70,000
$77,500
$ 2,125
42,500
$44,625
÷ 2,500
$
31
÷ 2,125
$
21
$122,125
$104,000
18,125
$122,125
(2,000*× $31) + (2,000*× $21)
(500† × $31) + (125† × $21)
Equivalent units completed and transferred out from Solution Exhibit 17-35A, Step 2.
Equivalent units in work in process, ending from Solution Exhibit 17-35A, Step 2.
17-7
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 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, summarizes total Drying and Packaging Department costs for week 37, 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 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, summarizes total Drying and Packaging Department costs for week 37, and assigns these
costs to units completed and transferred out and to units in ending work in process using the
FIFO method.
SOLUTIO 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
Direct
Conversion
Physical
Transferredin Costs
Materials
Costs
Flow of Production
Units
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%.
17-8
$174,300
23,360
$197,660
$197,660
17-9
Equivalent units completed and transferred out from Solution Exhibit 17-40A, Step 2.
†Equivalent units in work in process, ending from Solution Exhibit 17-40A, Step 2.
*
(Step 3) Work in process, beginning (given)
Costs added in current period (given)
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
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (5,250 units)
Work in process, ending (1,000 units)
Total costs accounted for
Total
Production
Costs
$ 38,060
159,600
÷ 5,250
$ 4.80
÷ 6,250
$
20
÷ 5,650
$ 8.40
Conversion
Costs
$ 9,060
38,400
$47,460
(5,250*× $20) + (5,250*× $4.80) + (5,250*× $8.40)
(1,000†× $20) + (0† × $4.80 ) + (400† × $8.40)
Direct
Materials
$
0
25,200
$25,200
Transferred
-in Costs
$ 29,000
96,000
$125,000
SOLUTIO EXHIBIT 17-40B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, 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.
SOLUTIO 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.
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
§
(Step 1)
Physical
Units
1,250
5,000
6,250
(Step 2)
Equivalent Units
TransferredDirect
Conversion
in Costs
Materials
Costs
(work done before current period)
1,250
0
1,250
250
4,000
4,000
4,000
1,000
0
400
5,000
5,250
4,650
4,000†
1,000
6,250
Degree of completion in this department: 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%.
†
17-10
$ 37,980
8,065
46,045
127,432
173,477
22,103
$195,580
$195,580
$ 37,980
157,600
†
17-11
Direct
Materials
Conversion
Costs
÷ 5,250
$ 4.80
÷ 4,650
$ 8.258
(1,000# × $18.80) +
(0# × $4.80) + (400# × $8.258)
(4,000† × $18.80) + (4,000† × $4.80) + (4,000† × $8.258)
(0* × $18.80) + (1,250* × $4.80) + (250* × $8.258)
÷ 5,000
$ 18.80
(Costs of work done before current period)
$94,000
$25,200
$38,400
Transferred
-in Costs
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 work in process, ending from Solution Exhibit 17-40C, Step 2.
*
Total costs accounted for
Work in process, beginning
($9,060 + $0 + $28,920)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Solution Exhibit 17-40C)
Cost per equiv. unit of work done in current period
(Step 4) Total costs to account for
(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
Production
Costs
SOLUTIO EXHIBIT 17-40D
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, 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.