In: Accounting
Apply the Concepts: FIFO and Weighted Average
Scenario 1: Dormir produces a liquid herbal sleep remedy. Production begins in the Blending Department. All materials are added at the beginning of the blending process. Output is measured in ounces. The production data for June are as follows:
Production: | |
Units in process, June 1, 70% complete* | 6,000 |
Units completed and transferred out | 36,000 |
Units in process, June 30, 40% complete* | 12,000 |
* With respect to conversion cost |
Complete the physical flow schedule given below. There are a number of useful relationships. For example, Units Started and Completed = Units Completed ‒ Units in BWIP and Units Started = Units Completed ‒ Units in EWIP
Units to Account for:
Units in BWIP | ||
Units started | ||
Total units to account for | ||
Units accounted for: | ||
Units Completed: | ||
From: BWIP | ||
Started and completed | ||
Units in BWIP | ||
Total units accounted for |
Prepare the Equivalent Unit Schedules for FIFO and Weighted Average by completing the Table below. Since inputs are non-uniform, equivalent units must be calculated separately for calculated for materials and conversion inputs. If an amount box does not require an entry, leave it blank or enter "0".
FIFO | WEIGHTED AVERAGE | ||||||
Direct Materials | Conversion | Direct Materials | Conversion | ||||
Units Completed | |||||||
Units Started and Completed | |||||||
Units in BWIP × Fraction to Complete | |||||||
Units in EWIP × Fraction Complete | |||||||
Equivalent Units |
Using the following cost data for the Blending Department for the month of June, calculate the unit cost for FIFO and Weighted Average (complete the table following cost data). The unit cost is the sum of the unit materials cost and the unit conversion cost. Round unit cost to two decimal places.
Costs:
Work in Process, June 1: | |
Direct materials | $600 |
Conversion costs | 210 |
Total work in process | $810 |
Current costs: | |
Direct materials | $7,560 |
Conversion costs | 1,830 |
Total current costs | $9,390 |
FIFO | WEIGHTED AVERAGE | |||||
Materials | Conversion | Total | Materials | Conversion | Total | |
Numerator (costs) | $ | $ | $ | $ | ||
Denominator (equivalent units) | ||||||
Unit Cost | $ | $ | $ | $ | $ | $ |
Calculate the cost of goods transferred out and the cost of EWIP for both FIFO and Weighted Average by completing the following Tables (Round unit cost to two decimal places.):
FIFO | |
Costs, BWIP | $ |
Cost to Complete BWIP | |
Cost of Goods Started and Completed | |
Cost of Goods Transferred Out | $ |
Weighted Average | |
Cost of Goods Transferred Out | $ |
FIFO | Materials | Conversion | Total Cost of EWIP |
Equivalent units in EWIP | |||
Unit cost | $ | $ | |
Cost of EWIP | $ | $ | $ |
Weighted Average | Materials | Conversion | Total Cost of EWIP |
Equivalent units in EWIP | |||
Unit cost | $ | $ | |
Cost of EWIP | $ | $ | $ |
Show that the costs to account for equal the costs assigned for both FIFO and Weighted Average by completing the following information.
Costs to account for: | |
Costs BWIP | $ |
Costs added (current) | |
Total costs to account for |
FIFO | Weighted Average |
||
Cost of goods transferred out | $ | $ | |
Cost of EWIP | |||
Total Cost Assigned | $ | $ |