Question

The difference in the denominator units (for purposes of calculating cost per unit) between the weighted average and the FIFO methods is that the units in the ending work in process inventory are not included in the FIFO calculation. a true false In computing unit cost figures for materials and conversion, costs in the beginning work in process inventory are not included in the numerator when the FIFO method is used. true b. false The following information applies to questions through 5: Miller's Root Beer is produced in two sequential processes Blending and Bottling. During September, the following data was collected for the Blending department: Number Materials Labor and Overhead of Units Percent Completed Percent Completed Work in process inventory, Sept 1 12.000 100% 20% Started into production during Sept 60,000 Completed and transferred 64,000 Work in process inventory, Sept 30 8,000 100% 60% Costs for Sept: Materials Labor and Overhead Work in process, Sept 1 $ 38,400 $ 1.800 $ 53,120 Added during the month $194,400 3. Assuming that the FIFO method is used, what is the materials cost per unit (round your answer, if necessary, to the nearest cent)? a $3.35 c. $3.38 $3.24 d. $3.28 Assuming that the FIFO method is used, what is the conversion cost per unit (round your answer, if necessary, to the nearest cent)? a. S.82 5.86 b. S.78 d. 5.80 Ignore your answers to W3 and 14. Assume that the materials cost per unit is $3.30 and the conversion cost per unit is 5.85, using the FIFO method. Which of the following is the correct journal entry to transfer the cost of completed units from the Blending department to the Bottling department using the FIFO method? a. debit WIP-Bottling $223.960, credit WIP-Blending $223,960 debit WIP-Blending $264,160; credit WIP-Bottling $264,160 debit WIP-Blending $223,960: credit WIP-Bottling $223,960 a debit WIP-Bottling $264,160; credit WIP-Blending $264,160 All production costs have been steadily rising at the Donner Company for several periods. In this environment, Donner Company's cost of ending Work In Process inventory using the FIFO method would be: the same as that computed under the weighted average method. higher than that computed under the weighted average method. c. lower than that computed under the weighted average method.

Answer 1

Answers for questions 3 through 5:-

3. Work in process inventory, Sept 1 - 12000 units.

Cost of materials - $ 38400.

So, cost of materials per unit = 38400 / 12000 = $ 3.20.

> Units started into production during Sept - 60000 units

Cost of materials added during Sept - $ 194400.

Since Material percent completed is 100%, all the materials are utilized.

So, cost of materials per unit = 194400 / 60000 = $ 3.24.

> If average cost of materials is to be calculated for Sept:-

Cost of materials for 12000 units @ $ 3.20 = 38400.

Cost of materials for 52000 units (64000 completed - 12000 opening WIP) @ $3.24 = 168480.

Total material cost for 64000 completed units = 38400+168480 = 206880.

So, average cost per unit = 206880 / 64000 = $ 3.2325.

4. Labor and Overheads:-

Completed units in Work in process inventory, Sept 1 = 20% of 12000 = 2400 units.

Units completed during the month = (80% of 12000) + (100% of 52000) + (60% of 8000)

= 9600 + 52000 + 4800

= 66400 units.

Total cost of labor and overheads added during the month = $ 53120.

So, Cost of labor and overheads per unit = 53120 / 66400 = $ 0.80.

5. Material cost per unit = $ 3.30

Conversion cost per unit = $ 0.85

Total cost of materials used during the month = 52000 * 3.30 = $ 171600.

Total cost of materials for completed 64000 units = 171600 + 38400 = $ 210000.

Total conversion cost incurred during the month (for completed units)

= 0.85 * ( (80% of 12000) + (100% of 52000))

= 0.85 * 61600 =$ 52360

Total conversion cost for completed 64000 units = 52360 + 1800 = $ 54160

Therefore, the total cost of completing 64000 units by Blending department = 210000 + 54160 = $ 264160.

So, the journal entry:

d. debit WIP-Bottling $ 264160; credit WIP-Blending $ 264160.