Question

Fullerton Aggregate processes raw shale into lightweight aggregate material. This process requires heat treating shale and injecting it with fly ash as it passes through rotating kilns. The shale both expands and hardens in the process, and is ideally suited to road construction.

The following information is available for a recent period:

Beginning work in process on September 1 consisted of 75,000 tons that were 80% complete with respect to raw materials and 50% complete with respect to conversion costs.

Ending work in process on September 30 consisted of 60,000 tons that were 70% complete with respect to raw materials and 40% complete with respect to conversion costs.

860,000 tons of material were put into production, and 875,000 tons exited production.

There is no spoilage or loss of tonnage in the production process.

Beginning work in process carried a total cost of $265,000, divided 40/20/40 with respect to direct material/direct labor/factory overhead.

Additional costs incurred during the month were $3,000,000, divided 50% to direct material and the remainder on a 1:2 ratio between direct labor and factory overhead.

Using (a) the weighted average method and (b) the FIFO method, calculate:

1. Equivalent units 2. Cost per equivalent unit 3. Costs assigned to cost of goods manufactured and ending inventory.

Answer 1

	PRODUCTION REPORT - WEIGHTED AVERAGE METHOD
	Quantity Schedule and Equivalent Units
			Quantity		Percentage Complete:
			Schedule				Materials		Conversion
		Units to be accounted for:			Beginning:		80%	*	50%	*
		Work in process, beginning	75000	*
		Started into production	860000	*	Ending:		70%	*	40%	*
		Total units to be accounted for	935,000
						Equivalent Units
		Units accounted for as follows:			Direct Materials		Direct Labor		FOH
		Transferred Out	875000	*	875,000		875,000		875,000
		Work in process, ending	60000	*	42,000		24,000		24,000
		Total units accounted for	935,000		917,000		899,000		899,000
	Unit Costs
		Work in process, beginning	265,000		106,000	*	53,000	*	106,000
		Cost added by the department	3,000,000		1,500,000	*	500,000	*	1,000,000
		Total cost (a)	3,265,000		1,606,000		553,000		1,106,000
		Equivalent units (b)			917,000		899,000		899,000
		Unit cost, (a)/(b)	3.60	=	1.75	+	0.62	+	1.23
	Cost Reconciliation					Equivalent Units (EU)
			Costs
		Cost to be accounted for:
		Work in process, beginning	265,000
		Cost added by the department	3,000,000
		Total cost to be accounted for	3,265,000
		Cost accounted for as follows:
	3.60	for Transferred Out units	3,147,154		875,000		875,000		875,000
		Work in process, ending:
	1.75	for Materials per EU	73,557		42,000
	0.62	for Labor per EU	14,763				24,000
	1.23	for Overhead per EU	29,526						24,000
		Total work in process, ending	117,846
		Total cost accounted for	3,265,000
	PRODUCTION REPORT - FIFO METHOD
	Quantity Schedule and Equivalent Units		Quantity		Percentage Complete:
			Schedule				Materials		Conversion
		Units to be accounted for:			Beginning:		80%		50%
		Work in process, beginning	75,000
		Started into production	860,000		Ending:		70%		40%
		Total units to be accounted for	935,000
						Equivalent Units
		Units accounted for as follows:			Materials		Labor		Overhead
		Transferred out:
		From beginning inventory	75,000		15,000		37,500		37,500
		Started and completed this period	800,000		800,000		800,000		800,000
		Work in process, ending	60,000		42,000		24,000		24,000
		Total units accounted for	935,000		857,000		861,500		861,500
	Unit Costs
		Cost added by the department (a)	3,000,000		1,500,000		500,000		1,000,000
		Equivalent units (b)			857,000		861,500		861,500
		Unit cost, (a)/(b)	3.49	=	1.75	+	0.58	+	1.16
	Cost Reconciliation					Equivalent Units (EU)
			Costs
		Cost to be accounted for:
		Work in process, beginning	265,000
		Cost added by the department	3,000,000
		Total cost to be accounted for	3,265,000
		Cost accounted for as follows:
		Transferred out:
		From beginning inventory:
		Cost in beginning inventory	265,000
		Cost to complete these units:
	1.75	for Materials per EU	26,254		15,000
	0.58	for Labor per EU	21,764				37,500
	1.16	for Overhead per EU	43,529						37,500
		Total cost	356,547
		Units started and completed	2,793,153		800,000		800,000		800,000
	3.49	800,000 @ $3.49 each
		Total costs transferred	3,149,700
		Work in process, ending:
	1.75	for Materials per EU	73,512		42,000
	0.58	for Labor per EU	13,929				24,000
	1.16	for Overhead per EU	27,858						24,000
		Total work in process, ending	115,300
		Total cost accounted for	3,265,000