Concept explainers
a.
Determine the equivalent units of production for the month of July using weighted average method and select the best answer from the given option.
a.
Answer to Problem 51P
Option (2) the equivalent units of production for the month of July using weighted average method formaterials is 870,000 and for conversion costs 814,000.
Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the
Compute the equivalent units of production for the month of July using weighted average method:
Particulars | Materials | Conversion |
Units transferred out | 790,000 | 790,000 |
EU in ending inventory | ||
Materials | 80,000(1) | |
Conversion costs | 24,000(2) | |
EU produced this period | 870,000 | 814,000 |
Working note 1:
Compute the ending inventory of materials:
Working note 2:
Compute the ending inventory for conversion costs:
(1)
720,000 for materials and 744,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 720,000 and 744,000 respectively
(2)
870,000 for materials and 814,000 for conversion costs is the correct option because these are the computed values of the same.
(3)
734,000 for materials and 720,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
(4)
795,000 for materials and 734,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
(5)
None of the above is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
b.
Determine the equivalent units produced during November using weighted-average method and select the best answer from the given option
b.
Answer to Problem 51P
Option (2) the equivalent units produced during November using weighted-average method are 370,000 for prior department costs, 330,000 for materials and 356,000 for conversion costs.
Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the process costing. Under this method work done on all completed units taken as 100% whether these units are from beginning inventory or units introduced in the process. The work done on the ending inventory is calculated as per work done on it with respect to the completed units.
Compute the equivalent units produced during November using weighted-average method:
Particulars | Prior department costs | Materials | Conversion costs |
Units transferred out | 330,000(3) | 330,000 | 330,000 |
EU in ending inventory | |||
Prior department costs | 40,000 | ||
Materials | 0 | ||
Conversion costs | 26,000 (4) | ||
EU produced this period | 370,000 | 330,000 | 356,000 |
Working note 3:
Compute the units transferred out:
Working note 4:
Compute the ending inventory conversion costs:
Justification for correct and incorrect answer:
(1)
Prior department costs 370,000, materials 330,000 and 304,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(2)
Prior department costs 370,000, materials 330,000 and 356,000 conversion costs equivalent units is the correct option as that are the computed values of the same.
(3)
Prior department costs 370,000, materials 330,000 and 345,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(4)
Prior department costs 320,000, materials 330,000 and 345,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(5)
None of the above is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
c.
Determine the equivalent units for the conversion costs using FIFO method and select the best answer from the given option.
c.
Answer to Problem 51P
Option (4) the equivalent units for the conversion costs using FIFO method is 342,000.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the equivalent units for the conversion costs using FIFO method:
Particulars | Amount |
Beginning inventory | 14,000(5) |
Add: Started and completed | 300,000 (6) |
Add: Ending inventory | 28,000 (7) |
Total equivalent units done | 342,000 |
Working note 5:
Compute the beginning inventory to be accounted for:
Working note 6:
Compute the units started and completed:
Working note 7:
Compute the equivalent units in ending inventory:
Justification for correct and incorrect answer:
(1)
298,000 is the incorrect option as the value of computed conversion costs is 342,000
(2)
320,000 is the incorrect option as the value of computed conversion costs is 342,000
(3)
348,000 is the incorrect option as the value of computed conversion costs is 342,000
(4)
342,000 is the correct option as the value of computed conversion costs is 342,000
(5)
None of the above is the incorrect option as the value of computed conversion costs is 342,000
d.
Determine the equivalent units produced for the month of December using FIFO method and select the best answer from the given option.
d.
Answer to Problem 51P
Option (1) the equivalent units produced for the month of December using FIFO method are 172,000 for materials and 168,000 for conversion costs.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the equivalent units produced for the month of December using FIFO method:
Particulars | Materials | Costs |
Materials | 0(8) | |
Conversion costs | 12,000(9) | |
Started and completed | 140,000(10) | 140,000 |
Ending inventory | ||
Materials | 32,000(11) | |
Conversion costs | 16,000 (12) | |
Work done | 172,000 | 168,000 |
Working note 8:
Compute the beginning inventory for materials:
Working note 9:
Compute the beginning inventory for conversion costs:
Working note 10:
Compute the started and completed units during the period:
Working note 11:
Compute the ending inventory for materials:
Working note 12:
Compute the ending inventory for conversion costs:
Justification for correct and incorrect answer:
(1)
172,000 for materials and 168,000 for conversion costs is the correct option as those are the computed values of materials and conversion costs.
(2)
212,000 for materials and 204,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(3)
212,000 for materials and 200,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(4)
172,000 for materials and 172,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(5)
None of the above is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
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Chapter 8 Solutions
Fundamentals Of Cost Accounting (6th Edition)
- Using the same data found in Exercise 6.22, assume the company uses the FIFO method. Required: Prepare a schedule of equivalent units, and compute the unit cost for the month of December. Fordman Company has a product that passes through two processes: Grinding and Polishing. During December, the Grinding Department transferred 20,000 units to the Polishing Department. The cost of the units transferred into the second department was 40,000. Direct materials are added uniformly in the second process. Units are measured the same way in both departments. The second department (Polishing) had the following physical flow schedule for December: Costs in beginning work in process for the Polishing Department were direct materials, 5,000; conversion costs, 6,000; and transferred in, 8,000. Costs added during the month: direct materials, 32,000; conversion costs, 50,000; and transferred in, 40,000.arrow_forwardHeap Company manufactures a product that passes through two processes: Fabrication and Assembly. The following information was obtained for the Fabrication Department for September: a. All materials are added at the beginning of the process. b. Beginning work in process had 80,000 units, 30 percent complete with respect to conversion costs. c. Ending work in process had 17,000 units, 25 percent complete with respect to conversion costs. d. Started in process, 95,000 units. Required: 1. Prepare a physical flow schedule. 2. Compute equivalent units using the weighted average method. 3. Compute equivalent units using the FIFO method.arrow_forwardDuring December, Krause Chemical Company had the following selected data concerning the manufacture of Xyzine, an industrial cleaner: All materials are added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work in process inventory had 120 of raw materials and 180 of conversion costs incurred. Materials added during December were 540, and conversion costs of 1,484 were incurred. Krause uses the first-in, first-out (FIFO) process cost method. The equivalent units of production used to compute conversion costs for December were: a. 110 units. b. 104 units. c. 100 units. d. 92 units.arrow_forward
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- Jackson Products produces a barbeque sauce using three departments: Cooking, Mixing, and Bottling. In the Cooking Department, all materials are added at the beginning of the process. Output is measured in ounces. The production data for July are as follows: With respect to conversion costs. Required: 1. Prepare a physical flow schedule for July. 2. Prepare an equivalent units schedule for July using the FIFO method. 3. What if 60 percent of the materials were added at the beginning of the process and 40 percent were added at the end of the process (all ingredients used are treated as the same type or category of materials)? How many equivalent units of materials would there be?arrow_forwardHolmes Products, Inc., produces plastic cases used for video cameras. The product passes through three departments. For April, the following equivalent units schedule was prepared for the first department: Costs assigned to beginning work in process: direct materials, 90,000; conversion costs, 33,750. Manufacturing costs incurred during April: direct materials, 75,000; conversion costs, 220,000. Holmes uses the weighted average method. Required: 1. Compute the unit cost for April. 2. Determine the cost of ending work in process and the cost of goods transferred out.arrow_forwarda. Based upon the data in Exercise 17-7, determine the following for December: 1. Direct materials cost per equivalent unit 2. Conversion cost per equivalent unit 3. Cost of the beginning work in process completed during December 4. Cost of units started and completed during December 5. Cost of the ending work in process b. Assuming that the direct materials cost is the same for November and December, did the conversion cost per equivalent unit increase, decrease, or remain the same in December?arrow_forward
- Chrome Solutions Company manufactures special chromed parts made to the order and specifications of the customer. It has two production departments, Stamping and Plating, and two service departments, Power and Maintenance. In any production department, the job in process is wholly completed before the next job is started. The company operates on a fiscal year, which ends September 30. Following is the post-closing trial balance as of September 30: Additional information: The balance of the materials account represents the following: The company uses the FIFO method of accounting for all inventories. Material A is used in the Stamping Department, and materials B and C are used in the Plating Department. The balance of the work in process account represents the following costs that are applicable to Job 905. (The customer’s order is for 1,000 units of the finished product.) The finished goods account reflects the cost of Job 803, which was finished at the end of the preceding month and is awaiting delivery orders from the customer. At the beginning of the year, factory overhead application rates were based on the following data: In October, the following transactions were recorded: Purchased the following materials and supplies on account: The following materials were issued to the factory: Customers’ orders covered by Jobs 1001 and 1002 are for 1,000 and 500 units of finished product, respectively. Factory wages and office, sales, and administrative salaries are paid at the end of each month. (Assume FICA and federal income tax rates of 8% and 10%, respectively.) Record the company’s liability for state and federal unemployment taxes. (Assume rates of 4% and 1%, respectively, and that none of the employees had reached the $8,000 limit.) Record the payroll distribution for October. Wages of the supervisors, custodial personnel, etc., totaled $9,500; administrative salaries were $18,300. Miscellaneous factory overhead incurred during October totaled $4,230. Miscellaneous selling and administrative expenses were $1,500. These items as well as the FICA tax and federal income tax withheld for September were paid. (See account balances on the post-closing trial balance for September 30.) Annual depreciation on plant assets is calculated using the following rates (round to nearest dollar): Factory buildings–5% Machinery and equipment–20% Office equipment–20% The balance of the prepaid insurance account represents a three-year premium for a fire insurance policy covering the factory building and machinery. It was paid on the last day of the preceding month and became effective on October 1. The summary of factory overhead prepared from the factory overhead ledger is reproduced here: The total expenses of the Maintenance Department are distributed on the basis of floor space occupied by the Power Department (8,820 sq ft), Stamping Department (19,500 sq ft), and Plating Department (7,875 sq ft). The power department expenses are then allocated equally to the Stamping and Plating departments. After the actual factory overhead expenses have been distributed to the departmental accounts and the applied factory overhead has been recorded and posted, any balances in the departmental accounts are transferred to Under- and Overapplied Overhead. Jobs 905 and 1001 were finished during the month. Job 1002 is still in process at the end of the month. During the month, Jobs 803 and 905 were sold with a mark-on percentage of 50% on cost. Received $55,500 from customers in payment of their accounts. Checks were issued in the amount of $43,706 for payment of the payroll. 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