Question

Alvin Construction manufactures small tractors on an assembly-line basis. The units are started in Department Y. On January 1 of this year, the Work-in-Process inventory of Department Y consisted of 200 units 100% complete as to materials and 20% complete as to conversion. During the month, 800 units were started and 500 units were completed and transferred out. The Work-in-Process on January 31 was 100% complete as to materials and 20% complete as to conversion. Costs in process at the beginning of the period amounted to $100,000 for materials and $25,000 for conversion. Costs added during the period were materials costs of $200,000 and conversion costs of $143,000. Required 1. Prepare a production cost report using the weighted-average method. Round answer to 4 decimal places. 2. Prepare the journal entries 4. What is the difference between job order costing and process costing? (6 points) 5. Explain the difference between a weighted-average method of process costing and a firstin, first-out method. (6 points) 6. Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not? Explain. (5 points)

Answer 1

1)

		Production Cost Report
		Equivalent Units
	Physical		Conversion
Quantities	Units	Materials	Costs
Units to be
accounted for
WIP, January 1	200	0	0
Started into	800
production
Total Units	1000
Units accounted
for
Transferred Out	500	500	500
WIP, January 31	500	500	100
Total Units	1000	1000	600

		Conversion
Costs	Materials	Costs	Total
Unit Costs
Total Costs	$ 3,00,000.00	$ 1,68,000.00	$ 4,68,000.00
Equivalent Units	1000	600
Unit Costs	$         300.00	$         280.00	$           580.00
Costs to be
accounted for
WIP, January 1	$ 1,00,000.00	$    25,000.00	$ 1,25,000.00
Started into
production	$ 2,00,000.00	$ 1,43,000.00	$ 3,43,000.00
Total			$ 4,68,000.00
Costs accounted
for
Transferred Out	(W.N.1)		$ 2,90,000.00
WIP, January 31	(W.N. 2)		$ 1,78,000.00
Total			$ 4,68,000.00

W.N.1
Cost of units transferred out
	Units	Cost/unit	Costs
Materials	500	$ 300.00	$ 1,50,000.00
Conversion	500	$ 280.00	$ 1,40,000.00
			$ 2,90,000.00

W.N.2
Cost of Closing WIP
	Units	Cost/unit	Costs
Materials	500	$ 300.00	$ 1,50,000.00
Conversion	100	$ 280.00	$    28,000.00
			$ 1,78,000.00

2)	Journal Entries
	Particulars			Debit	Credit
	WIP - Department Y			$ 2,00,000.00
	To Materials				$ 2,00,000.00
	WIP - Department Y			$ 1,43,000.00
	To Conversion				$ 1,43,000.00
	WIP - Department Z			$ 2,90,000.00
	To WIP - Department Y				$ 2,90,000.00

4)	In Job Order Costing, jobs are worked on during each period, with
	each job having different production requirements, where costs are
	accumulated by individual job.
	In Process Costing, a single product is produced either on a continuous
	basis or for long periods of time and here all units are of siminal nature
	and identical. Here costs are accumulated by department.

5)	Under FIFO method, units that have entered the process first will be
	completed and transferred out first. Costs of the units that are incomplete
	in some terms in the beginning inventory will not be included to compute
	cost per equivalent unit, rather they will be allocated directly to the units
	present in the beginning inventory.
	Under Weighted Average Method, all the units and their respective costs are
	given same weightage and are processed together. Cost of the beginning inventory
	as well as costs added during the period are added together to compute
	cost per equivalent unit.

Due to time constraint, all the questions couldn't be answered. I hope you'd understand. Thank you