Question

Larsen Company is a manufacturer of car seats. Each car seat passes through 1st the assembly department and 2nd testing department. This problem focuses on the testing department. Direct materials are added when the 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. Suppose that Larsen Company uses FIFO in all of its departments. Data for the testing department for October 2014 are as follows:

                                                   Physical      Transferred-          Direct             Conversion

                                                       units          In Costs           Materials                    Costs

Beg. work in process ^a                   7,500        $2,800,000        $0 $835,460

Transferred in currently                 ? =_____ <------ question

Units Completed [UC]                      26,300

End. work in process ^b                     3,700

Total costs added currently        - - - - - - -          $7,735,250       $9,704,700          $3,955,900

-----------------------------------
^aDegree of completion: transferred-in,?____%; direct materials,0%; conversion, 70%.

^bDegree of completion: transferred-in costs,100%; direct materials,0%; conversion costs, 60%.

[And answer Question 1-5 step by step]

Required: Fill in the blanks ABOVE and below. Grading will NOT consider your format and step-by-step solution:

1.a. Are the %s on Beg. Inventory REQUIRED for YOU to compute the equivalent units in the Required Item 1 below? Y/N? ____.

1.b. Compute the Current-period’s equivalent units in the TESTING department:

For the Transferred-in ______________, Direct Material ________________, and Conversion _____________________.

2. Is the total equivalent units the total of OUTPUT or INPUT done? My answer is it’s ________.

4. Calculate the Current-period’s Cost per equivalent unit for:

the Transferred-in ______________, Direct Material ________________, and

Conversion _______________.

5. Assign costs to the units completed and transferred out: $___________________;

and to those in ending work in process: $___________________.

Answer 1

As the material is added at 90% of completion stage, therefore, degree of completion fo WIP is as under"
a. Transferred in cost: 100%, Material :0% and conversion 70%
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				7,500.00
Add: Units Started in Process				22,500.00
Total Units to account for:				30,000.00
UNITS TO BE ACCOUNTED FOR:
Units completed from beginning work in process				7,500.00
Units started and completed				18,800.00
Ending Work in Process				3,700.00
Total Units to be accounted for:				30,000.00
Equivalent Units:
			Transferred in Cost		Material Cost		Conversion Cost
			% Completion	Units	% Completion	Units	% Completion	Units
Units completed from beginning WIP			0%	0.00	100%	7,500.00	30%	2,250.00
Units started annd completed			100%	18,800.00	100%	18,800.00	100%	18,800.00
Ending Work in Process			100%	3,700.00	0%	0.00	60%	2,220.00
Total Equivalent units				22,500.00		26,300.00		23,270.00
COST PER EQUIVALENT UNIT:
			Transferred-in		Material		Conversion
Cost added during the period			7,735,250		9,704,700		3,955,900
Equivalent Units			22,500.00		26,300.00		23,270.00
Cost per Equivalent unit			343.79		369.00		170.00
TOTAL COST ACCOUNTED FOR:
Units started and Completed and Transferred out (18800 units)
			Equivalent unit	Cost per EU	Total Cost
Transferred-in cost			18,800	343.79	6463252
Material cost			18,800	369	6937200
Conversion Cost			18,800	170	3196000
Total Cost of Units completed and transferred out:					16596452
Completed from beginning Work in process (7500 units)
			Equivalent unit		Total Cost
Beginning cost					3635460
Transferred-in cost			0.00	343.79	0
Material cost			7,500.00	369	2767500
Conversion Cost			2,250.00	170	382500
Total cost of Ending Work in process:					6,785,460
Total cost assigned to Finished Goods					23,381,912
Ending Work in Process (3700 units)
			Equivalent unit		Total Cost
Transferred-in cost			3,700.00	343.79	1272023
Material cost			0.00	369	0
Conversion Cost			2,220.00	170	377400
Total cost of Ending Work in process:					1,649,423
Total Cost accounted for:					25,031,335