Question

Standard-costing method, assigning costs. Refer to the information in Exercise 17-24. Suppose Bio Dec determines standard costs of $6.60 per equivalent unit for direct materials and $10.40 per equivalent unit for conversion costs for both beginning work in process and work done in the current period.

1. Do Exercise 17-24 using the standard-costing method. Note that you first need to calculate the equivalent units of work done in the current period (for direct materials and conversion costs) to complete beginning work in process, to start and complete new units, and to produce ending work in process

2. Compute the total direct materials and conversion costs variances for July 2008.

Answer 1

Standard-costing method, assigning costs.

1.         

The calculations of equivalent units for direct materials and conversion costs are identical to the calculations of equivalent units under the FIFO method. Solution Exhibit 17-25A shows the equivalent unit calculations for standard costing and computes the equivalent units of work done in July 2008. Solution Exhibit 17-26 uses the standard costs (direct materials, $6.60; conversion costs, $10.40) to summarize total costs to account for, and to assign these costs to units completed and transferred out and to units in ending work-in-process inventory.

2.         

Solution Exhibit 17-26 shows the direct materials and conversion costs variances for

 

                        Direct materials                                  $20,000 U

                        Conversion costs                                  $8,750 U

SOLUTION EXHIBIT 17-26

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;

Standard Costing Method of Process Costing, Bio Doc Corporation for July 2008.

The calculations of equivalent units for direct materials and conversion costs are identical to the calculations of equivalent units under the FIFO method.