Question

Transferred-in costs, FIFO method (continuation of 17-33). Refer to the information in Problem 17-33. Suppose that Larsen Company uses the FIFO method instead of the weighted-average method in all of its departments. The only changes to Problem 17-33 under the FIFO method are that total transferred-in costs of beginning work in process on October 1 are $2,881,875 (instead of $2,932,500) and that total transferred-in costs added during October are $7,735,250 (instead of $7,717,500). Using the FIFO process-costing method, do Problem 17-33.

 

Answer 1

Transferred-in costs, FIFO method (continuation of 17-33)

 

1.         

As explained in Problem 17-33, requirement 1, transferred-in costs are 100% complete and direct materials are 0% complete in both beginning and ending work-in-process inventory.

2.         

The equivalent units of work done in October 2009 in the Testing Department for transferred-in costs, direct materials, and conversion costs are calculated in Solution Exhibit 17-34A.

3.         

Solution Exhibit 17-34B summarizes total Testing Department costs for October 2009, calculates the cost per equivalent unit of work done in October 2009 in the Testing 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.

4.         

Journal entries:

a.   Work in Process––Testing Department                              7,735,250

          Work in Process––Assembly Department                                              7,735,250

Cost of goods completed and transferred out

 during October from the Assembly Dept. to

 the Testing Dept.

 

b.   Finished Goods                                                                 23,463,766

          Work in Process––Testing Department                                                23,463,766

Cost of goods completed and transferred out

 during October from the Testing Department

 to Finished Goods inventory.

 

SOLUTION EXHIBIT 17-34A

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

FIFO Method of Process Costing,

Testing Department of Larsen Company for October 2009.

· Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 70%.

†26,300 physical units completed and transferred out minus 7,500 physical units completed and transferred out from beginning work-in-process inventory.

*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.  

SOLUTION EXHIBIT 17-34B

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,

Testing Department of Larsen Company for October 2009.

As explained in Problem 17-33, requirement 1, transferred-in costs are 100% complete and direct materials are 0% complete in both beginning and ending work-in-process inventory.