Problem1 – Process costing
Timing Tech, a manufacturing company, has two departments: Production department and Finishing department. Goods completed in the Production department are immediately sent to the Finishing department. The following data pertains to the Production department.
Physical Direct Material Direct Labor
Units Cost Cost
Beg. WIP inventory (Jan. 1 2014) 200,000 units $ 200,000 $ 315,000
Units Started during the year 1,000,000 units
Costs incurred during the year $1,300,000 $1,995,000
End. WIP inventory (Dec. 31 2014) 300,000 units
Beg. WIP completion rate: Direct Material – 100%, Conversion cost – 50%
End. WIP completion rate: Direct Material – 100%, Conversion cost – 80%
The company uses normal costing for allocation of manufacturing overhead. The pre-determined allocation rate in 2013 and 2014 is 60% of direct labor cost.
Required) Answer the following questions using a) FIFO method and b) Weighted Average Method.
FIFO
What is the number of physical units for the following accounts:
Goods Completed ______________
WIP End. Balance ___________________
What is the cost per equivalent unit?
Direct Material $_______________
Conversion $_______________
Compute the cost assigned to goods completed/transferred-out to testing department and the cost assigned to WIP ending balance for the Production department.
Transferred-out $_________________
WIP ending balance $________________
Problem 1 – Continued
Weighted average method
What is the number of physical units for the following accounts:
Goods Completed ______________
WIP End. Balance ___________________
What is the cost per equivalent unit?
Direct Material $_______________
Conversion $_______________
Compute the cost assigned to goods completed/transferred-out to testing department and the cost assigned to WIP ending balance for the Production department.
Transferred-out $_________________
WIP ending balance $________________
1 Statement showing physical units
Units to account for | |
Beginning work in process on Jan 1, 2014 | 200000 |
Started during the period | 1000000 |
Total physical units to account for | 1200000 |
Units accounted for : | |
Goods completed | 900000 (1200000-300000) |
WIP ending balance | 300000 |
2 . Statement showing equivalent units of production :-
Physical units | equivalent units | Equivalent units | |
Units to account for : | Direct material | direct labor | |
Beginning WIP | 200000 | ||
Started during the period | 1000000 | ||
Units to account for | 1200000 | ||
Beginning WIP completed | 200000 | 0 | 100000 (200000x50%) |
Started and transferred | 700000 | 700000 (700000x100%) | 700000 (700000x100%) |
Ending WIP | 300000 | 300000 (300000x100%) | 240000 (300000x80%) |
Total physical Units accounted for | 1200000 | ||
Equivalent units | 1000000 | 1040000 | |
Cost per equivalent units = cost incurred during the period (2014) / equivalent units
Direct material = $1300000 / 1000000 = $1.3
Direct labor = $1995000/1040000 = $1.92
3. Cost assigned to completed and transferred out = 700000x1.3+800000x1.92 = 910000+1534615 = $2444615.
Cost assigned to WIP ending balance = 300000x1.3+240000x1.92 = 390000+460385 = $850385.
Weighted average
1. Statement showing physical units :-
Units to account for : | |
Beginning WIP | 200000 |
Started during the year | 1000000 |
Total physical units to account for | 1200000 |
Units accounted for :- | |
Goods completed |
900000 (1200000-300000) |
Ending WIP inventory | 300000 |
2. Statement showing equivalent units produced :-
Equivalent units | equivalent units | ||
Units to account for :- | Physical units | direct material | direct labor |
Beginning WIP | 200000 | ||
Started during the period | 1000000 | ||
Total physical units to be accounted for | 1200000 | ||
Completed and transferred | 900000 | 900000 (900000x100%) | 900000 (900000x100%) |
Ending WIP | 300000 | 300000 (300000x100%) | 240000 (300000x80%) |
Total physical units accounted for | 1200000 | ||
Equivalent units | 1200000 | 1140000 | |
Equivalent cost = beginning cost + cost incurred during the period / equivalent units
= Direct material = 200000+1300000/1200000 = $1.25
Direct labor = 315000+1995000/1140000 = $2.03
3. Cost assigned to gto giods completed and transferred out = 900000x1.25+900000x2.03 = 1125000+1823684 = $2948684 or
Cost assigned to ending WIP = 300000x1.25+240000x2.03 = 375000+486316 = $861316.
Problem1 – Process costing Timing Tech, a manufacturing company, has two departments: Production department and Finishing...
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