Question

Complete the problems below on process costing and variance analysis.

Part 1: You must prepare two process costing cost reports – one using the weighted average method and one using the fifo method.  
Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Molding Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Data for the Assembly Department for August 2017 are:
Work in process, beginning inventory: 2600 units
Direct materials (100% complete)
Conversion costs (35% complete)

Units started during August 715 units

Work in process, ending inventory: 520 units
Direct materials (100% complete)
Conversion costs (55% complete)

Costs for August:
Standard costs for Assembly:
Direct materials $18 per unit
Conversion costs $35.50 per unit

Work in process, beginning inventory:
Direct materials $12,600
Conversion costs $8250

Part 2A: Variance Problem
Castleton Corporation manufactured 36,000 units during March. The following fixed overhead data relates to March:
Actual Static Budget
Production 36,000 units 34,000 units
Machine-hours 6,960 hours 6,800 hours
Fixed overhead costs for March $164,700 $156,400
Compute the fixed overhead variances.

Part 2B: Variance Problem
Russo Corporation manufactured 21,000 air conditioners during November. The overhead cost-allocation base is $34.50 per machine-hour. The following variable overhead data pertain to November:

Actual Budgeted
Production 21,000 units 23,000 units
Machine-hours 12,700 hours 13,800 hours
Variable overhead cost per machine-hour:
$34.00 $34.50
Compute the variable overhead variances.

Answer 1

Dear student, we cannot able to post solution more than one question as per our policy.

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 100% unit completed in the previous period. It means remaining 0% completed in this month.
For conversion cost 35% unit completed in the previous period. It means the remaining 65% completed in this month.

	Direct material	Conversion Cost
Cost per Equivalent Unit for month of August	$          18.00	$          35.50
Multiply: Equivalent Units of production under FIFO Method	715	2171
Cost incurred during Month	$ 12,870.00	$ 77,070.50

Morgan Clay
Assembly Department production Report
First in First out (FIFO) Method
Month ended August 31, 2017
Summary of Physical units
Units in beginning WIP inventory			2600
Units started during month			715
Total unit to be accounted for			3315
Units completed and transferred out (3315-520)			2795
Units in ending WIP inventory			520
Total unit accounted for			3315
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	2600	0%	0	65%	1690
Units in Started and completed (2795-2600)	195	100%	195	100%	195
units in ending WIP inventory	520	100%	520	55%	286
Equivalent Units of production			715		2171
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	$   12,600.00	$      8,250.00	$    20,850.00
Cost incurred during Month (Add)	$   12,870.00	$    77,070.50	$    89,940.50
total cost to be accounted for	$   25,470.00	$    85,320.50	$ 110,790.50
cost per Equivalent Unit
Cost incurred during Month	12870	77070.5
Equivalent Units of production	715	2171
Cost per Equivalent Unit	18.00	35.50	53.50
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
Direct material	$   12,600.00
Conversion Cost	$      8,250.00
Cost in beginning WIP		$    20,850.00
Direct material (0*18)	$                   -
Conversion Cost (1690*35.5)	$   59,995.00
Cost incurred for complete beginning WIP		$    59,995.00
Direct material (195*18)	$      3,510.00
Conversion Cost (195*35.5)	$      6,922.50
Cost of units in Started and completed		$    10,432.50
cost assigned to units transferred out		$    91,277.50
cost assigned to units ending work in progress
Direct material (520*18)	$      9,360.00
Conversion Cost (286*35.5)	$   10,153.00
cost assigned to units ending work in progress		$    19,513.00
Total cost assigned		$ 110,790.50

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

Morgan Clay
Assembly Department production Report
Weighted average Method
Month ended August 31, 2017
Summary of Physical units
Units in beginning WIP inventory			2600
Units started during month			715
Total unit to be accounted for			3315
Units completed and transferred out (3315-520)			2795
Units in ending WIP inventory			520
Total unit accounted for			3315
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	2600	100%	2600	100%	2600
Units in Started and completed (2795-2600)	195	100%	195	100%	195
units in ending WIP inventory	520	100%	520	35%	182
Equivalent Units of production			3315		2977
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	$    12,600.00	$      8,250.00	$       20,850.00
Cost incurred during Month (Add)	$    12,870.00	$    77,070.50	$       89,940.50
Total cost to be accounted for	$    25,470.00	$    85,320.50	$    110,790.50
cost per Equivalent Unit
total cost to be accounted for	25470	85320.5
Divided by: Equivalent Units of production	3315	2977
Cost per Equivalent Unit	$          7.6833	$        28.6599	$          36.3432
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
units completed and transferred out	2795	2795
Cost per Equivalent Unit	$          7.6833	$        28.6599
cost assigned to units transferred out	$    21,474.71	$    80,104.40	$    101,579.11
cost assigned to units ending work in progress
equivalent units in ending WIP inventory	520	182
Cost per Equivalent Unit	$          7.6833	$        28.6599
cost assigned to units ending work in progress	$      3,995.29	$      5,216.10	$         9,211.39
Total cost assigned			$    110,790.50