Question

* 7 Four Seasons Company makes snow blowers. Materials are added at the beginning of the process and conversion costs are uniformly incured. At the beginning of September, work- in-process is 40Na complete and at the end of the month it is 60% complete. Other data for the month include: Beginning work-in-process inventory Units started Units placed in finished goods 1600 units 2000 units 3200 units Conversion costs Cost of direct materials $260 (O Beginning work-in-process costs: Materials Conversion $154 000 $82 080 Required:

Answer 1

Assuming that firm follows weighted average method to record cost flow: Credit General Journal Finished Goods Inventory Work in Process Inventory Debit $630,400 $630,400 Workings: Under weighted average method, equivalent units are to be calculated only for units completed & transferred out and units lying as ending work in process as it is assumed that the units once entered into the process become integral part of total units and no segregation between units transferred from beginning work in process and introduced during current process. Conversion cost includes Labor + Overheads. So, Physical units of production: Units in beginning inventory Add: Units started during current period Less: Units completed and transferred out Units in ending inventory 1,600 2,000 -3,200 400 Particulars Completed and transferred Ending work in process Equivalent Units of Production (EUP) Whole Units 3,200 400 3,600 EUP- % / EUP- Materials Materials Conversion Conversion 100% 3,200 100% 3,200 100% 400 60% 240 3,600 3,440 [3200 units x 100%; 3200 units x 100%] [400 units x 100%; 400 units x 60%]

Cost per equivalent units of production Cost of beginning work in process Cost added during the period Total Materials Costs & Conversion Costs Divided by Equivalent units of Production (EUP) Cost per Equivalent units of Production Materials Conversion $154,000 $82,080 $260,000 $200,000 $414,000 $282,080 3,600 3,440 [As computed EUP schedule presented above] $115 $82 ($414000 / 3600 units = $115; $282080 / 3440 units = $82] Cost of goods completed & transferred EUP Materials 3,200 Conversion 3,200 Total Cost of goods completed & transferred out Cost per Totals EUP $115.00 | $368,000 [3200 units x $115] $82.00 $262,400 [3200 units x $82] $630,400 Assuming that firm follows FIFO method to record cost flow: Credit General Journal Finished Goods Inventory Work in Process Inventory Debit $626,937 $626,937 Workings:

Under FIFO method, equivalent units would consist efforts required to complete the beginning inventory, efforts put for completed and transferred out goods and ending inventory. As the materials are introduced at the beginning itself, beginning inventory is 100% complete in terms of materials, 0% efforts would be required in current process or period whereas conversion costs would require the uncompleted portion of costs in current process or period. That is, it was complete 40% already and so 60% efforts would be required for conversion in current period. Units in beginning inventory Add: Units added during the period Less: Units in ending inventory Units completed and transferred out 1,600 2,000 -400 3,200 --> Of which 1600 units shall be from beg. inventory; Bal. 1600 units from current. Particulars Physical Units 1,600 1,600 3.200 400 3,600 Beginning work in process Started, Completed and transferred Transferred to next process Ending work in process Equivalent Units of Production (EUP) % / EUP % EUP Materials Materials Conversion Conversion 0% 60% 960 100% 1,600 100% 1,600 1,600 2,560 100% 400 60% 240 2,000 2,800 [1600 units x 0%; 1600 units x 60%] [1600 units x 100%; 1600 units x 100%] [400 units x 100%; 400 units x 60%]

Cost per equivalent units of production Direct Materials Conversion [Under FIFO method, it shall not be considered here] Conversion = $86,000 + ($86,000 x 125%) --> Labor + Overhead] Cost of beginning work in process Cost added during the period Total Materials Costs & Conversion Costs Equivalent units of Production (EUP) Cost per Equivalent units of Production $260,000 $260,000 2,000 $130.00 $200,000 $200,000 | 2,800 $71.429 [As computed EUP schedule presented above] [Materials = $260000 / 2000 units = $130; Conversion = $200000 / 2800 = $71.429] Cost of goods completed & transferred EUP Cost per EUP Totals Materials - Beginning cost Conversion - Beginning Cost Cost of goods completed & trfd from beginning $154,000 $82,080 $236,080 [Given] [Given] 1,600 2,560 $130.00 $71.429 Materials - Current Cost Labor - Current Cost Cost of goods completed & trfd from current Total Cost of goods completed & transferred $208,000 [1600 units x $130] $182,857 [2560 units x $71.429] $390,857 $626,937 [$236080 + $390857]