Question

Transferred-in costs, weighted-average and FIFO methods. Frito-Lay, Inc., manufactures convenience foods, including potato chips and corn chips. Production of corn chips occurs in four departments: Cleaning, Mixing, Cooking, and Drying and Packaging. Consider the Drying and Packaging Department, where direct materials (packaging) are added at the end of the process. Conversion costs are added evenly during the process. The accounting records of a Frito-Lay plant provide the following information for corn chips in its Drying and Packaging Department during a weekly period (week 37):

 

1. Using the weighted-average method, summarize the total Drying and Packaging Department costs for week 37, and assign total costs to units completed (and transferred out) and to units in ending work in process.

2. Assume that the FIFD method is used for the Drying and Packaging Department Under FIFO, the transferred-in costs for work-in-process beginning inventory in week 37 are $28,920 (instead of $29,000 under the weighted-average method), and the transferred-in costs during week 37 from the Cooking Department are $94,000 (instead of $96,000 under the weighted-average method). All other data are unchanged. Summarize the total Drying and Packaging Department costs for week 37, and assign total costs to units completed and transferred out and to units in ending work in process using the FIFOmethod.

Answer 1

Transferred-in costs, weighted-average and FIFO methods

 

1.         

Solution Exhibit 17-40A computes the equivalent units of work done to date in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs. Solution Exhibit 17-40B summarizes total Drying and Packaging Department costs for week 37, calculates the cost per equivalent unit of work done to date in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the weighted-average method.

 

2.         

Solution Exhibit 17-40C computes the equivalent units of work done in week 37 in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs. Solution Exhibit 17-40D summarizes total Drying and Packaging Department costs for week 37, calculates the cost per equivalent unit of work done in week 37 in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the FIFO method.

 

SOLUTION EXHIBIT 17-40A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;

Weighted-Average Method of Process Costing,

Drying and Packaging Department of Frito-Lay Inc. for Week 37.

 

SOLUTION EXHIBIT 17-40B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process;

Weighted-Average Method of Process Costing,

Drying and Packaging Department of Frito-Lay Inc. for Week 37.

 

SOLUTION EXHIBIT 17-40C

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;

FIFO Method of Process Costing,

Drying and Packaging Department of Frito-Lay Inc. for Week 37.

 

SOLUTION EXHIBIT 17-40D

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed and to Units in Ending Work in Process;

FIFO Method of Process Costing,

Drying and Packaging Department of Frito-Lay Inc. for Week 37.

Solution Exhibit 17-40A computes the equivalent units of work done to date in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs. Solution Exhibit 17-40B summarizes total Drying and Packaging Department costs for week 37, calculates the cost per equivalent unit of work done to date in the Drying and Packaging Department for transferred-in costs, direct materials, and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work in process using the weighted-average method.