Question

Transferred-in costs, weighted average method (related to 17-30 to 17-32). Larsen Company, as you know, is a manufacturer of car seats. Each car seat passes through the Assembly Department and Testing Department This problem focuses on the Testing Department Direct materials are added when the Testing Department process is 90% complete. Conversion costs are added evenly during the Testing Department's process. As work in Assembly is completed, each unit is immediately transferred to Testing. As each unit is completed in Testing, it is immediately transferred to Finished Goods. Larsen Company uses the weighted-average method of process costing. Data for the Testing Department for October 2009 are:

 

1. What is the percentage of completion for (a) transferred-in costs and direct materials in beginning work-in-process inventory, and (b) transferred-in costs and direct materials in ending work-in-process inventory?

2. For each cost category, compute equivalent units in the Testing Department Show physical units in the first column of your schedule.

3. For each cost category, summarize total Testing Department costs for October 2009, calculate the cost per equivalent unit and assign total costs to units completed (and transferred out) and to units in ending work in process.

4. Prepare journal entries for October transfers from the Assembly Department to the Testing Department and from the Testing Department to FinishedGoods.

 

Answer 1

Transferred-in costs, weighted-average method (related to 17-30 to 17-32).

 

1.         Transferred-in costs are 100% complete, and direct materials are 0% complete in both beginning and ending work-in-process inventory. The reason is that transferred-in costs are always 100% complete as soon as they are transferred in from the Assembly Department to the Testing Department. Direct materials in beginning or ending work in process for the Testing Department are 0% complete because direct materials are added only when the testing process is 90% complete and the units in beginning and ending work in process are only 70% and 60% complete, respectively.

2.         Solution Exhibit 17-33A computes the equivalent units of work done to date in the Testing Department for transferred-in costs, direct materials, and conversion costs.

3.         Solution Exhibit 17-33B summarizes total Testing Department costs for October 2009, calculates the cost per equivalent unit of work done to date 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 weighted-average method.

4.         Journal entries:

a.   Work in Process––Testing Department                                    7,717,500

            Work in Process––Assembly Department                                                 7,717,500

         Cost of goods completed and transferred out

            during October from the Assembly 

            Department to the Testing Department

b.   Finished Goods                                                                       23,459,600

            Work in Process––Testing Department                                                   23,459,600

         Cost of goods completed and transferred out

            during October from the Testing Department

            to Finished Goods inventory

 

SOLUTION EXHIBIT 17-33A

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

Weighted-Average Method of Process Costing,

Testing Department of Larsen Company for October 2009.

		(Step 1)			(Step 2)
					Equivalent Units
	Flow of Production		Physical Units	Transferred-in  Costs		Direct Materials	Conversion  Costs

Work in process, beginning (given)               7,500

Transferred in during current period (given)  22,500

To account for                                                30,000

Completed and transferred out

 during current period                                    26,300               26,300 26,300 26,300

Work in process, ending* (given)                     3,700

3,700 × 100%; 3,700 × 0%; 3,700 × 60%                              3,700  0 2,220

Accounted for                                                30,000                                        

Work done to date                                                                   30,000 26,300 28,520

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

SOLUTION EXHIBIT 17-33B

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,

Testing Department of Larsen Company for October 2009.

Transferred-in costs are 100% complete, and direct materials are 0% complete in both beginning and ending work-in-process inventory