Question

Raphael's Refining uses a weighted average process costing system. For a particular period, its opening inventory consisted of 100 items (60 per cent complete as to conversion costs) whose costs were $1600 made up of material $300 and conversion cost $1300. During the 1. month, 1000 items were started and 950 were completed. Ending inventory of WIP was one- third complete. There was no spoilage. Costs placed in process during the month were materials $1600 and conversion costs $13 700. Materials are added at the halfway point. i. What is the amount of cost that would be allocated to goods completed in the period? (1 mark) ii. What is the amount of cost that would be allocated to goods completed in the period if Raphael's Refining uses a FIFO process costing system? (2 mark)

Part II. FIFO process costing system

Answer 1

Answer 1	Weighted average Method	16,150
Answer 2	First in First out (FIFO) Method	$ 16,171

Material added when 50% unit completed.

Step for solution
Step 1	Equivalent Units of production = Physical units multiplied by % of competition
Step 2	Calculate total cost to be accounted for
Step 3	Cost per Equivalent Unit = total cost to be accounted for / Equivalent Units of production
Step 4	Cost assigned to units transferred out = units completed and transferred out * Cost per Equivalent Unit
Step 5	Cost assigned to units ending work in progress = equivalent units in ending WIP inventory * Cost per Equivalent Unit

Company Name
Department production Report
Weighted average Method
Period ended
Summary of Physical units
Units in beginning WIP inventory			100
Units started during month			1000
Total unit to be accounted for			1100
Units completed and transferred out			950
Units in ending WIP inventory (1100-950)			150
Total unit accounted for			1100
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	100	100%	100	100%	100
Units in Started and completed (950-100)	850	100%	850	100%	850
units in ending WIP inventory	150	0%	0	33.33%	50
Equivalent Units of production			950		1000
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	300	1,300	1,600
Cost incurred during Month (Add)	1,600	13,700	15,300
total cost to be accounted for	1,900	15,000	16,900
cost per Equivalent Unit
total cost to be accounted for	1900	15000
Divided by: Equivalent Units of production	950	1000
Cost per Equivalent Unit	2.00	15.00	17.00
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out (Your answer)
units completed and transferred out	950	950
Cost per Equivalent Unit	2.00	15.00
cost assigned to units transferred out (Your answer)	1900	14250	16,150
cost assigned to units ending work in progress
equivalent units in ending WIP inventory	0	50
Cost per Equivalent Unit	2.00	15.00
cost assigned to units ending work in progress	0	750	750
Total cost assigned			16,900

Step for solution
Step 1	Equivalent Units of production = Physical units multiplied by % of competition
Step 2	Calculate total cost to be accounted for
Step 3	Cost per Equivalent Unit = Cost incurred during Month / Equivalent Units of production
Step 4	Cost assigned to units transferred out = Cost in beginning WIP + Cost incurred for complete beginning WIP + Cost of units in Started and completed
Step 5	Cost assigned to units ending work in progress = equivalent units in ending WIP inventory * Cost per Equivalent Unit
For direct material 50% unit completed in previous period. It means remaining 50% completed in this month.
For conversion cost 60% unit completed in previous period. It means remaining 40% completed in this month.

Company Name
Department production Report
First in First out (FIFO) Method
Period ended
Summary of Physical units
Units in beginning WIP inventory			100
Units started during month			1000
Total unit to be accounted for			1100
Units completed and transferred out			950
Units in ending WIP inventory (1100-950)			150
Total unit accounted for			1100
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	100	50%	50	40%	40
Units in Started and completed (950-100)	850	100%	850	100%	850
units in ending WIP inventory	150	0%	0	33.333%	50
Equivalent Units of production			900		940
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	300	1,300	1600
Cost incurred during Month (Add)	1,600	13,700	15300
total cost to be accounted for	1900	15000	16900
cost per Equivalent Unit
Cost incurred during Month	1600	13700
Equivalent Units of production	900	940
Cost per Equivalent Unit	1.778	14.574	16.352
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
Direct material	$               300
Conversion Cost	$           1,300
Cost in beginning WIP		$          1,600
Direct material (50*1.778)	$                 89
Conversion Cost (40*14.574)	$               583
Cost incurred for complete beginning WIP		$              672
Direct material (850*1.778)	$           1,511
Conversion Cost (850*14.574)	$         12,388
Cost of units in Started and completed		$        13,899
cost assigned to units transferred out (Your answer)		$        16,171
cost assigned to units ending work in progress
Direct material (0*1.778)	$                  -
Conversion Cost (50*14.574)	$               729
cost assigned to units ending work in progress		$              729
Total cost assigned		16,900