Question

The smelting department of Company X has following production and cost data for September:

Production: No beginning work in process; units started into production 1,000 units; units transferred out to next department 900 units; ending work in process 100 units that are 100% complete as to materials and 4z% complete as to conversion costs.

Manufacturing costs: In current period, TL50,x00 worth of materials, TL25,y00 worth of labor and TL3t,000 worth of manufacturing overhead costs are incurred.

(a) (15 points) Assuming Company X uses WA method to compute equivalent units: i. Summarize the flow of physical units

ii. Compute output in terms of equivalent units
iii. Compute total and unit costs
iv. Prepare a cost reconciliation schedule and assign costs to transferred out and ending inventory

(b) (15 points) Assuming Company X uses FIFO method to compute equivalent units: i. Summarize the flow of physical units

ii. Compute output in terms of equivalent units
iii. Compute total and unit costs
iv. Prepare a cost reconciliation schedule and assign costs to transferred out and ending inventory

(c) (10 points) Compare the value of transferred out and ending inventory for WA method in Part (a) to the value of transferred out and ending inventory for FIFO method in Part (b). Are they equal? Why/Why not?

FOR x=5, y=3, z=6, t=5

Answer 1

Answer a-i.
Unit Reconciliation
Units to account for:
Beginning WIP	-
Started into Production	1,000
Total units to account for	1,000
Total units accounted for
Completed during the period	900
Ending WIP	100
Total units accounted for	1,000
Answer a-ii.
Equivalent Units of Production (EUP) - Weighted Average Method
	Units	% Material	EUP-Materials	% Conversion	EUP-Conversion
Completed during the period	900	100%	900	100%	900
Ending WIP	100	100%	100	46%	46
Equivalent Units of Production (EUP)			1,000		946
Answer a-iii.
Cost per EUP			Materials		Conversion
Beginning WIP			-		-
Cost Incurred during the period			50,500.00		60,300.00
Total Costs		Costs	50,500.00	Costs	60,300.00
Equivalent Units of Production (EUP)		EUP	1,000.00	EUP	946.00
Cost per Equivalent Units of Production			50.50		63.74
Cost Assignment and Reconciliation
Costs Transferred Out	EUP	Cost per EUP	Total Cost
Direct Materials	900.00	50.50	45,450.00
Conversion	900.00	63.74	57,367.86
Total transferred Out			102,817.86
Costs of Ending WIP	EUP	Cost per EUP	Total Cost
Direct Materials	100.00	50.50	5,050.00
Conversion	46.00	63.74	2,932.14
Total Ending WIP			7,982.14
Total costs accounted for				110,800.00
Answer iv.
Costs Charged to Production
Costs of Beginning WIP	-
Costs incurred this period	110,800.00
Total Costs to account for	110,800.00
Total costs accounted for	110,800.00
Difference due to rounding cost/unit	-
Answer b.
FIFO Method
Production Cost Report
Particulars		Equivalent Units
	Physical Units	Materials	Conversion Costs
Units to be accounted for
Work in process - Beginning	-
Started into production	1,000
Total units	1,000
Units accounted for
Goods Units Completed & transferred out:
From Beginning WIP	-	-	-
Started & Completed (210,000- 60,000)	900	900	900
Work in process, Ending	100	100	46
(100% materials, 46% conversion costs)
Equivalent units accounted for	1,000	1,000	946
	Materials	Conversion Costs	Total
Total Cost to Account for:
WIP, Beginning	-	-	-
Cost added in current period	50,500	60,300	110,800
Total cost to be account for	50,500	60,300	110,800
Cost added in current period	50,500	60,300	110,800
Equivalent Units of work done in current Period	1,000	946
Cost per Equivalent Unit	50.50	63.74	114.24
Assignment of Costs:
Goods Units and Completed out (900 Units)
WIP, Beginning -	-	-	-
Cost added to Beg. WIP in Current period	-	-	-
Total of Beginning Inventory	-	-	-
Started and completed - 900 Units	45,450.00	57,367.86	102,817.86
	(150,000 units X $0.84)	(150,000 Units X $2.90)
Total Cost of good units completed & transferred out	45,450.00	57,367.86	102,817.86
WIP, Ending - 100 Units	5,050.00	2,932.14	7,982.14
	(30,000 units X $0.84)	(21,000 Units X $2.90)
Total Cost accounted For	50,500.00	60,300.00	110,800.00
Answer c.
Value of Units Transferred out - Weighted Avg	102,817.86
Value of Units Transferred out - FIFO	102,817.86
Difference	-
Value of Ending Inventory - Weighted Avg	7,982.14
Value of Ending Inventory - FIFO	7,982.14
Difference	-
There is no difference in cost of units transferred cost and ending inventory, because there in beginning WIP.