Question

The records of Fremont Corporation's initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs. Work-in-process inventory Finished goods inventory Units 210,000 25,000 Unaudited Costs $ 817,542 364,740 As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available. Costs Direct Materials $376,800 Beginning inventory (80% complete as to labor) Units started Current costs Units completed and transferred to finished goods inventory Units 92,000 580,000 Direct Labor $1,032,000 2.244,000 1,740,000 462,000 Required: a. Prepare a production cost report for Fremont using the weighted average method. (Hint: You will need to calculate equivalent units for three categories: materials, labor, and overhead.) (Round "Cost per equivalent unit" to 2 decimal places.) FREMONT CORPORATION Production Cost Report-Weighted Average Flow of Production Units Physical Units Units to be accounted for Beginning WIP inventory 92,000 Units started this period 580.000 Total units to be accounted for 672.000

Answer 1

FREMONT CORPATION
Producton Cost Report-Weighted Average
Flow of Production Units	Physical Units
Units to be accounted for:
Beginning WIP Inventory	92000
Units Started this period	580000
Total Units to be accounted for	672000

Equivalent Units of Production (EUP)-Weighted Average Method
	Units	% Materials	EUP-Materials	% Materials	EUP-Labor	% Overhead	EUP-Overhead
Total Units accounted for:
Units completed and transferred out:
From Beginning WIP Inventory	92000
Started and completed currently	370000
Transferred out	462000	100%	462000	100%	462000	100%	462000
Units in Ending WIP Inventory	210000	100%	210000	40%	84000	40%	84000
Total Units accounted for	672000		672000		546000		546000

	Details
Cost per EUP	Total costs	Materials	Labor	Overhead
Cost to be accounted for
Cost in Beginning WIP Inventory	$        2,234,400	$          376,800	$                  1,032,000	$           825,600
Current period costs	$        5,779,200	$       1,740,000	$                  2,244,000	$        1,795,200
Total Cost to be accounted for	$       8,013,600	$      2,116,800	$                  3,276,000	$       2,620,800
Cost per equivalent unit
Materials (Costs/Equivalents units)		$3.15
Labor (Costs/Equivalents units)			$6.00
Overhead (Costs/Equivalents units)				$4.80
Overhead cost = 80% of Labor costs
Cost Assignment and Reconciliation
Cost accounted for
Costs assigned to Units transferred out
Materials	$1,455,300	$1,455,300
Labor	$2,772,000		$2,772,000
Overhead	$2,217,600			$2,217,600
Total Costs of units transferred out	$6,444,900
Costs assigned to Ending WIP Inventory
Materials	$661,500	$661,500
Labor	$504,000		$504,000
Overhead	$403,200			$403,200
Total ending WIP Inventory	$1,568,700
Total Cost accounted for	$8,013,600	$2,116,800	$3,276,000	$2,620,800

Calculations:
Costs assigned to Units transferred out	EUP	Cost per EUP	Total Cost
Materials	462000	$3.15	$1,455,300
Labor	462000	$6.00	$2,772,000
Overhead	462000	$4.80	$2,217,600
Total Costs of units transferred out			$6,444,900
Costs assigned to Ending WIP Inventory
Materials	210000	$3.15	$661,500
Labor	84000	$6.00	$504,000
Overhead	84000	$4.80	$403,200
Total ending WIP Inventory			$1,568,700

(b)
Costs assigned to Ending WIP Inventory	Work in Progress Inventory	Finished Goods Inventory
As per Unaudited records	$817,542	$364,740
As per Actual	$1,568,700	$348,750	25000* (3.15+6+4.80)
Difference	($751,158)	$15,990
	Understated	Overstated

Journal entry
Event	General Journal		Debit	Credit
1	WIP Invenory		$751,158
	Cost of Goods sold (bal. Fig)			$735,168
	Finished Goods Inventory			$ 15,990
	(To record differnece adjust)

( c)
If adjustment in req (b) is not made, then
Income would have been	Understated
Work in progress would have been	Understated
Finished Goods would have been	Overstated

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