Question
In: Accounting
Synchromatic Industries manufactures tiles for sale in the home renovation industry. It uses the weighted-average method...
Synchromatic Industries manufactures tiles for sale in the home renovation industry. It uses the weighted-average method for its two divisions. Division A performs the first process in the production process and Division B performs the second. Following is information for Division B for the month of September:
| Physical Units | |||
| WIP, Sep 1 | 2,600 (30% complete) | ||
| Transferred from Division A | 12,000 units | ||
| WIP, Sep 30 | 3,000 (10% complete) | ||
| Sep 1, WIP | Costs added in September | Total | |
| Transferred in | $25,740 | $120,000 | $145,740 |
| Direct materials | 8,190 | 48,000 | 56,190 |
| Direct Labour | 20,904 | 300,240 | 321,144 |
| Overhead | 6,864 | 100,080 | 106,944 |
| Total | $61,698 | $568,320 | $630,018 |
In Division B, materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. There is no spoilage of the products.
Calculate the total cost of the units completed and transferred out of Division B in September (rounded) using the FIFO method.
Solutions
Expert Solution
All amounts are in $
Using FIFO (Process Costing)
Units Completed & transferred from B = 2,600 + 12,000 - 3,000
= 11,600 units
Out of these, opening WIP units are 2,600 and the remaining 9,000 units are started this month.
Equivalent Units :
Formula = Opening WIP units (1-% already completed) + Units Started & completed + Ending WIP units x % completed
For transferred in cost = 2,600 (1-100%) + 9,000 + 3,000 x 100%
= 12,000 units
For Materials = 12,000 units (same as above)
For Direct labour & OH = 2,600 (1-30%) + 9,000 + 3,000 x 10%
= 11,120 units
Cost per Equivalent Unit :
Formula = Current period Costs/Equivalent units
For Transferred in Cost = 120,000/12,000 = 10 per unit
For Materials = 48,000/12,000 = 4 per unit
For Direct labour & Overhead = (300,240+100,080)/11,120
= 36 per unit
Total cost of equivalent units = 10+4+36 = 50 per unit
Cost of Units Completed & transferred out
1. From Opening WIP
= 61,698 + 2,600 units x 70% x 36
= 127,218
2. From Current period started units
= (11,600-2,600) units x 50
= 450,000
Total Cost = 450,000 + 65,520 = 577,218
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