Question

system de testino 17-31 Weighted average method. Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Larsen Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing. Larsen Company uses the weighted average method of process costing. Data for the assembly depart- ment for October 2014 are as follows: ning ors) and he proembly procesele indirect Direct Materials $1,250,000 Physical Units (Car Seats) 5,000 20,000 22,500 2,500 Conversion Costs $ 402,750 Work in process, October 18 Started during October 2014 Completed during October 2014 Work in process, October 31b Total costs added during October 2014 $4,500,000 $2,337,500 Degree of completion: direct materials,?%; conversion costs, 60%. bDegree of completion: direct materials,?%; conversion costs, 70%. 1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule. 2. What issues should the manager focus on when reviewing the equivalent units calculation?! 3. For each cost category, summarize total assembly department costs for October 2014 and calculate the cost per equivalent unit. 4. Assign costs to units completed and transferred out and to units in ending work in process.

Answer 1

Part 1

		Equivalent units
Flow of Production	Physical units	Direct materials	Conversion costs
Work in process, beginning (given)	5000
Transferred-in during current period (given)	20000
To account for	25000
Completed and transferred out during current period	22500	22500	22500
Work in process, ending (given) (2500*100%); (2500*70%)	2500	2500	1750
Accounted for	25000
Work done to date		25000	24250

Part 2

The manager should consider that as the 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.

Part 3

	Total Production Costs	Direct Materials	Conversion Costs
(Step 3) Work in process, beginning (given)	1652750	1250000	402750
Costs added in current period (given)	6837500	4500000	2337500
Total costs to account for	8490250	5750000	2740250
(Step 4) Costs incurred to date		5750000	2740250
Divide by equivalent units of work done to date		25000	24250
Cost per equiv. unit of work done in current period		$230	$113

Part 4

	Total Production Costs	Direct Materials	Conversion Costs
Assignment of costs:
Completed and transferred out (22,500 units)	7717500	5175000 (22500*230)	2542500 (22500*113)
Work in process, ending (2,500 units)	772750	575000 (2500*230)	197750 (1750*113)
Total costs accounted for	8490250	5750000	2740250