Tutorial 6

Ch:17 process costing – FIFO

Exercise 1: Pet Products Company uses an automated process to manufacture its
pet replica products. For June, the company had the following activities:

Beginning work in process inventory 4,500 items, 1/4 complete

Units placed in production 15,000 units
Units completed 17,500 units
Ending work in process inventory 2,000 items, 3/4 complete

Cost of beginning work in process $5,250

Direct material costs, current $16,500
Conversion costs, current $23,945

Direct materials are placed into production at the beginning of the process and
conversion costs are incurred evenly throughout the process.

Required:
Prepare a production cost worksheet using the FIFO method.
Answer:

Direct
Flow of production Physical Units Materials Conversion
Work in process, beginning 4,500
Started during period 15,000
To account for 19,500

Units completed
Work in process, beginning 4,500 3,375
Started and completed 13,000 13,000 13,000
Work in process, ending 2,000 2,000 1,500
19,500 15,000 17,875

Direct
Costs Totals Materials Conversion
Work in process, beginning $5,250
Costs added during period 40,445 $16,500 $23,945
Total costs to account for $45,695 $16,500 $23,945
Divided by equivalent units 15,000 17,875
Equivalent unit costs $2.44 $1.10 $1.34

Assignment of costs
Work in process, beginning 5,250.00
Completion of beginning (3,375 ×
$1.34) 4,522.50
Total beginning inventory 9,772.50
Started and Completed (13,000 × $2.44) 31,720.00
Total costs transferred out $41,492.50
Work in process, ending
Direct materials (2,000 × $1.10) $2,200.00
Conversion (2,000 × $1.34 × 0.75) 2,010.00 4,210.00
Costs accounted for $45,702.50
Surf Products Company uses an automated process to clean and polish its souvenir
items. For March, the company had the following activities:

Beginning work in process 3,000 items, 1/3

inventory complete
Units placed in production 12,000 units
Units completed 9,000 units
Ending work in process 6,000 items, 1/2
inventory complete

Cost of beginning work in

process $2,500
Direct material costs, current $9,000
Conversion costs, current $7,700

Direct materials are placed into production at the beginning of the process and
conversion costs are incurred evenly throughout the process.

Required:
Prepare a production cost worksheet using the FIFO method.
Answer:

Direct
Flow of production Physical Units Materials Conversion
Work in process, beginning 3,000
Started during period 12,000
To account for 15,000

Units completed
Work in process, beginning 3,000 2,000
Started and completed 6,000 6,000 6,000
Work in process, ending 6,000 6,000 3,000
15,000 12,000 11,000

Direct
Costs Totals Materials Conversion
Work in process, beginning $2,500 0
Costs added during period 16,700 $9,000 $7,700
Total costs to account for $19,200 $9,000 $7,700
Divided by equivalent units 12,000 11,000
Equivalent unit costs $1.45 $0.75 $0.70

Assignment of costs
Work in process, beginning 2,500
Completion of beginning (2,000 × $0.70) 1,400
Total beginning inventory 3,900
Started and Completed (6,000 × $1.45) 8,700
Total costs transferred out $12,600
Work in process, ending
Direct materials (6,000 × $0.75) $4,500
Conversion (6,000 × $0.70 × 0.50) 2,100 6,600
Costs accounted for $19,200
17-33 Transferred-in costs, weighted-average method (related to 17-30 to 17-
Larsen Company, is a manufacturer of car seats. Each car seat passes through the
assembly department and testing. department. This problem focuses on the testing
department. Direct materials are added when testing. department process is 90%
complete. Conversion costs are added evenly during the testing. department’s
process. As work in assembly is completed, each unit is immediately transferred to
testing. As each unit is completed in testing, it is immediately transferred to
Finished Goods.
Larsen Company uses the weighted-average method of process costing. Data for
the testing department for October 2012 are as follows:

1. What is the percentage of completion for (a) transferred-in costs and direct
materials in beginning work-in-process inventory, and (b) transferred-in costs and
direct materials in ending work-in-process inventory?
2. For each cost category, compute equivalent units in the testing department.
Show physical units in the
first column of your schedule.
3. For each cost category, summarize total testing department costs for October
2012, calculate the cost per equivalent unit, and assign total costs to units
completed (and transferred out) and to units in ending.
work in process.