CHAPTER 5
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.
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 2007 in the Testing Department for
transferred-in costs, direct materials, and conversion costs are calculated in Solution Exhibit 1734A.
3.
Solution Exhibit 17-34B calculates the cost per equivalent unit of work done in October
2007 in the Testing Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Testing 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 FIFO method.
4.
Journal entries:
a. Work in Process––Testing Department
Work in Process––Assembly Department
Cost of goods completed and transferred out
during October from the Assembly Dept. to
the Testing Dept.
b. Finished Goods
Work in Process––Testing Department
Cost of goods completed and transferred out
during October from the Testing Department
to Finished Goods inventory.
17-6
3,188,000
3,188,000
9,281,527
9,281,527
SOLUTIO" 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 Global Defense, Inc., for October 2007.
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§
30 × (100% − 100%); 30 × (100% − 0%);
30 × (100% − 70%)
Started and completed
75 × 100%; 75 × 100%; 75 × 100%
Work in process, ending* (given)
15 × 100%; 15 × 0%; 15 × 60%
Accounted for
Work done in current period only
§
(Step 1)
Physical
Units
30
90
120
(Step 2)
Equivalent Units
TransferredDirect
Conversion
in Costs
Materials
Costs
(work done before current period)
30
0
30
9
75
75
75
15
0
9
90
105
93
75†
15
120
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 70%.
105 physical units completed and transferred out minus 30 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%.
†
17-7
17-8
Direct
Materials
Conversion
Costs
$
÷ 90
35,422.22
$
÷ 105
37,000
$
÷ 93
17,000
(Costs of work done before current period)
$3,188,000
$3,885,000
$1,581,000
Transferred
-in Costs
$1,311,860
1,263,000 (0* × $35,422.22) + (30* × $37,000) + (9* × $17,000)
2,574,860
6,706,667 (75† × $35,422.22) + (75† × $37,000) + (75† × $17,000)
9,281,527
684,333 (15# × $35,422.22) + (0# × $37,000) + (9# × $17,000)
$9,965,860
$9,965,860
$1,311,860
8,654,000
*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 work in process, ending from Solution Exhibit 17-34A, Step 2.
Work in process, beginning
($331,800 + $0 + $980,060))
(Step 3) Costs added in current period (given)
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 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (105 units):
Work in process, beginning (30 units)
Costs added to beg. work in process in current period
Total from beginning inventory
Started and completed (75 units)
Total costs of units completed & transferred out
Work in process, ending (15 units)
Total costs accounted for
Total
Production
Costs
SOLUTIO" EXHIBIT 17-34B
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,
Testing Department of Global Defense, Inc., for October 2007.
17-35 (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%.
17-9
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.
17-10
17-37 (20 min.) FIFO method (continuation of 17-35).
The equivalent units of work done in April 2007 in the Forming Department for direct materials
and conversion costs are shown in Solution Exhibit 17-37A.
Solution Exhibit 17-37B calculates the cost per equivalent unit of work done in April 2007
in the Forming Department 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 under the FIFO method.
The equivalent units of work done in beginning inventory is: direct materials, 300 × 100%
= 300; and conversion costs 300 × 40% = 120. The cost per equivalent unit of beginning
inventory and of work done in the current period are:
Direct materials
Conversion costs
Beginning
Inventory
$25 ($7,500 ÷ 300)
$17.708 ($2,125 ÷ 120)
Work Done in
Current Period
(Calculated Under
FIFO Method)
$31.818
$21.197
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.
Cost of units completed and transferred out
Work in process, ending
Total costs accounted for
Weighted
FIFO
Average
(Solution
(Solution
Exhibit 17-35B) Exhibit 17-37B) Difference
$104,000
$103,566
–$434
18,125
18,559
+$434
$122,125
$122,125
The FIFO ending inventory is higher than the weighted-average ending inventory by $434.
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 FIFO.
17-11
SOLUTIO" EXHIBIT 17-37A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing, Forming Department of Star Toys for April 2007.
(Step 1)
Physical
Units
300
2,200
2,500
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§
300 × (100% − 100%); 300 × (100% − 40%)
Started and completed
1,700 × 100%; 1,700 × 100%
Work in process, ending* (given)
500 × 100%; 500 × 25%
Accounted for
Work done in current period only
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
(work done before current period)
300
0
180
1,700
1,700
500
125
2,200
2,005
1,700†
500
2,500
§
Degree of completion in this department: direct materials, 100%; conversion costs, 40%.
2,000 physical units completed and transferred out minus 300 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 25%.
†
SOLUTIO" EXHIBIT 17-37B
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, Forming Department of Star Toys for April 2007.
Total
Production
Costs
Work in process, beginning
(given: $7,500 + $2,125)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Exhibit 17-37A)
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 (2,000 units):
Work in process, beginning (300 units)
Costs added to begin. work in process in
current period
Total from beginning inventory
Started and completed (1,700 units)
Total costs of units completed & tsfd. out
Work in process, ending (500 units)
Total costs accounted for
$
9,625
112,500
Direct
Materials
Conversion
Costs
(work done before current period)
$70,000
$42,500
÷ 2,200
÷ 2,005
$31.818
$21.197
$122,125
$
9,625
3,815
13,440
90,126
103,566
18,559
$122,125
(0* × $31.818) + (180* × $21.197)
(1,700† × $31.818) + (1,700† × $21.197)
(500# × $31.818) + (125# × $21.197)
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-37A, Step 2.
†
Equivelant units started and completed from Solution Exhibit 17-37A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-37A, Step 2.
17-12
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
Spinning Department for transferred-in costs, direct materials, and conversion costs.
Solution Exhibit 17-38B calculates the cost per equivalent unit of work done to date in
the Spinning Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Spinning 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.
2.
Journal entries:
a. Work in Process––Spinning Department
Work in Process––Drawing Department
Cost of goods completed and transferred out
during April from the Drawing Department
to the Spinning Department
b. Finished Goods
Work in Process––Spinning Department
Cost of goods completed and transferred out
during April from the Spinning Department
to Finished Goods inventory
96,000
96,000
166,008
166,008
SOLUTIO" EXHIBIT 17-38A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing,
Spinning Department of Jhirmack Woolen Mills for April 2007.
(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)
(400 × 100%; 400 × 0%; 400 × 60%)
Accounted for
Work done to date
a
(Step 2)
Equivalent Units
Physical Transferred- Direct Conversion
Units
in Costs Materials Costs
600
1,800
2,400
2,000
2,000
2,000
2,000
400
400
0
240
2,400
2,400
2,000
2,240
Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
17-13
b
a
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 17-38A)
Cost per equivalent unit of work done to date
Total costs to account for
Assignment of costs:
Completed and transferred out (2,000 units)
Work in process, ending (400 units):
Total costs accounted for
$166,008
25,642
$191,650
$191,650
17-14
Equivalent units completed and transferred out from Sol. Exhibit 17-38A, step 2.
Equivalent units in ending work in process from Sol. Exhibit 17-38A, step 2.
(Step 4)
(Step 5)
(Step 3)
2,000
$ 8.90
Direct
Materials
$
0
17,800
$17,800
$
2,240
25
Conversion
Costs
$10,000
46,000
$56,000
(2,000a × $49.104) + (2,000a × $8.90) + (2,000a × $25)
(400b × $49.104) + (0b × $8.90) + (240b × $25)
2,400
$ 49.104
Total
Production Transferred-in
Costs
Costs
$ 31,850
$ 21,850
159,800
96,000
$117,850
SOLUTIO" EXHIBIT 17-38B
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,
Spinning Department of Jhirmack Woolen Mills for April 2007.
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 2007 in the
Spinning Department for transferred-in costs, direct materials, and conversion costs.
Solution Exhibit 17-37B calculates the cost per equivalent unit of work done in April
2007 in the Spinning Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Spinning 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 FIFO method.
Journal entries:
a. Work in Process––Spinning Department
Work in Process––Drawing Department
Cost of goods completed and transferred out
during April from the Drawing Department to
the Spinning Department.
b.
Finished Goods
Work in Process––Spinning Department
Cost of goods completed and transferred out
during April from the Spinning Department
to Finished Goods inventory.
94,500
94,500
160,100
160,100
2.
The equivalent units of work done in beginning inventory is: Transferred-in costs, 600 ×
100% = 600; direct materials, 600 × 0% = 0; and conversion costs, 600 × 40% = 240. The cost
per equivalent unit of beginning inventory and of work done in the current period are:
Transferred-in costs (weighted average)
Transferred-in costs (FIFO)
Direct materials
Conversion costs
Beginning
Inventory
$36.42 ($21,850 ÷ 600)
$30.53 ($18,320 ÷ 600)
—
$41.67 ($10,000 ÷ 240)
Work Done in
Current Period
$53.33 ($96,000 ÷ 1,800)
$52.50 ($94,500 ÷ 1,800)
$8.90
$25
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 Spinning
Department.
Cost of units completed and transferred out
Work in process, ending
Total costs accounted for
Weighted
Average
FIFO
(Solution
(Solution
Exhibit 17-38B) Exhibit 17-39B)
$166,008
$160,100
26,520
25,642
$191,650
$186,620
17-15
Difference
–$5,908
+$ 878
The FIFO ending inventory is higher than the weighted-average ending inventory by $878.
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 (–$5,908) does not fully offset the
difference in ending work-in-process inventory (+$878). This is because the FIFO and weightedaverage methods result in different values for transferred-in costs with respect to both beginning
inventory and costs transferred in during the period.
SOLUTIO" EXHIBIT 17-39A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Spinning Department of Jhirmack Woolen Mills for April 2007.
(Step 2)
Equivalent Units
(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
[600 × (100% – 100%); 600 × (100% – 0%); 600
Started and completed
(1,400 × 100%; 1,400 × 100%; 1,400 × 100%)
Work in process, endingc (given)
(400 × 100%; 400 x 0%; 400 × 60%)
Accounted for
Work done in current period only
Physical Transferred-in
Direct
Conversion
Units
Costs
Materials
Costs
600
(work done before current period)
1,800
2,400
600
× (100% – 40%)]
400
____
2,400
a
0
600
1,400
1,400
1,400
400
____
1,800
0
____
2,000
240
____
2,000
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.
2,000 physical units completed and transferred out minus 600 physical units completed and transferred out from beginning
work-in-process inventory.
c
Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
b
17-16
360
1,400b
SOLUTIO" EXHIBIT 17-39B
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,
Spinning Department of Jhirmack Woolen Mills for April 2007.
Work in process, beginning (given: $18,320 + $10,000)
Costs
added in current period (given)
(Step 3)
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 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (2,000 units)
Work in process, beginning (600 units)
Costs added to beginning work in process in current period
Total from beginning inventory
Started and completed (1,400 units)
Total costs of units completed and transferred out
Work in process, ending (400 units):
Total costs accounted for
a
Total
Production
Costs
$ 28,320
158,300
_______
$186,620
$ 28,320
13,620
41,940
118,160
160,100
26,520
$186,620
Transferred-in
Costs
(costs of work
$94,500
÷ 1,800
$ 52.50
(0a × $52.50) +
(1,400b × $52.50) + (1
(400c × $52.50) +
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