Question

36 Weighted average method. Hoffman Company manufactures car seats in its Boise 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 Hoffman 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 de- partment finishes work on each car seat, it is immediately transferred to testing. Hoffman Company uses the weighted-average method of process costing. Data for the assembly de- partment for October 2017 are as follows: Direct Materials $1,248,000 Conversion Costs $ 241,650 Work in process, October 1a Started during October 2017 Completed during October 2017 Work in process, October 316 Total costs added during October 2017 Physical Units (Car Seats) 4,000 22,500 26,000 500 $4,635,000 $2,575,125 Degree of completion: direct materials,2%; conversion costs, 45%. Degree of completion: direct materials,7%; conversion costs, 65%. 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-unit calculations? 3. For each cost category, summarize total assembly department costs for October 2017 and calculate the cost per equivalent unit. 4. Assign costs to units completed and transferred out and to units in ending work in process. 37 Journal entries (continuation of 36). Prepare a set of summarized journal entries for all October 2017 transactions affecting Work in Process- Assembly. Set up a T-account for Work in Process-Assembly and post your entries to it.

Direct Materials is 100%

Answer 1

1. Equivalent units = Units transferred + Ending WIP x Completion

		Material	Conversion
Units to account for
Beginning Work in process	4000
Units started	22500
Total Units to account for	26500
Units accounted for
Units transferred	26000	26000	26000
Equivalent units in ending WIP	500	500	325
Total units accounted for	26500
Equivalent units of production		26500	26325

2.
Production supervisor can change the estimate of degree of completion as per requirements, such as they might be showing higher degree of completion thereby reducing per unit cost, and on the other hand, they might show lower degree of completion to understate net income.
Therefore manager should take care of these things, so that true data is presented.

3.

	Material	Conversion	Total
Cost of beginning work in process	$   1,248,000	$      241,650	$    1,489,650
Cost added during the production	$   4,635,000	$ 2,575,125	$    7,210,125
Total Cost	$   5,883,000	$ 2,816,775	$    8,699,775
Equivalent units of production	26500	26325
Cost per Equivalent unit	$         222.00	$        107.00

4.

	Material	Conversion	Total
Ending Work in process inventory
Equivalent units	500	325
Cost per Equivalent unit	$         222.00	$        107.00
Cost of Ending Work in process inventory	$       111,000	$        34,775	$       145,775
Units completed and transferred out
Units transferred	26000	26000
Cost per Equivalent unit	$         222.00	$        107.00
Cost of Units transferred	$   5,772,000	$ 2,782,000	$    8,554,000
Costs to be accounted for
Cost of beginning work in process	$   1,489,650
Cost added during production	$   7,210,125
Total Costs to be accounted for	$   8,699,775
Costs accounted for as follows
Cost of Ending work in process	$       145,775
Cost of Units transferred	$   8,554,000
Total Costs accounted for	$   8,699,775