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COST ACCOUNTING COST OF PRODUCTION SUMMARY: WEIGHTED AVERAGE AND FIFO METHODS The Company uses a single...

COST ACCOUNTING

COST OF PRODUCTION SUMMARY: WEIGHTED AVERAGE AND FIFO METHODS

The Company uses a single department production process. Materials are added at the start of the production process and labor and overhead are added as indicated. For January 2015, the Company records have the following information:

UNITS:
Beginning WIP:                                                                                                          10,000 units

100% complete for materials, 50% complete for labor; 30% complete for overhead

Units started in process                                                                                               50,000 units

Units completed                                                                                                          49,000 units

Ending WIP:                                                                                                             11,000 units

100% complete for materials, 60% complete for labor; 20% complete for overhead

PRODUCTION COSTS:

Work in Process, Beginning of the Month:
Materials                                          $ 22,000
Labor                                                   18,000
Overhead                                             11,000                                                          51,000

Current Month Costs:
Materials                                          $ 320,000
Labor                                                   180,160
Overhead                                             152,840                                    653,000

                                    Total Costs:                        $                                  704,000

REQUIRED:

Prepare a Cost of Production Summary using the weighted average method (calculations for equivalent units of production, cost per equivalent unit of production, total cost for units completed and WIP, ending). Prepare your calculations for Materials, Labor, and Overhead separately.

Prepare the appropriate journal entries at month end.

Prepare a Cost of Production Summary using the FIFO method (calculations for equivalent units of production, cost per equivalent unit of production, total cost for WIP, beginning, units started and completed and WIP, ending). Prepare your calculations for Materials, Labor, and Overhead separately.

Prepare the appropriate journal entries at month end.

You need to present your work in an excel spreadsheet and you need to create your own formatting (templates).

Solutions

Expert Solution

Solution 1:

Computation of Equivalent unit of Production - Weighted Average
Particulars Physical Units Material Labor Overhead
Unit completed & Transferred out 49000 49000 49000 49000
Closing WIP: 11000
Material (100%) 11000
Labour (60%) 6600
Overhead (20%) 2200
Equivalent units of production 60000 60000 55600 51200
Computation of Cost per equivalent unit of Production - Weighted Average
Particulars Material Labor Overhead
Opening WIP $22,000.00 $18,000.00 $11,000.00
Cost Added during January $320,000.00 $180,160.00 $152,840.00
Total cost to be accounted for $342,000.00 $198,160.00 $163,840.00
Equivalent units of production 60000 55600 51200
Cost per Equivalent unit $5.70 $3.56 $3.20
Computation of Cost of ending WIP and units completed & transferred out - Weighted Average
Particulars Material Labor Overhead Total
Equivalent unit of Ending WIP 11000 6600 2200
Cost per equivalent unit $5.70 $3.56 $3.2000
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit) $62,700 $23,523 $7,040 $93,263
Units completed and transferred 49000 49000 49000
Cost of units completed & Transferred to finished goods (Unit completed * cost per equivalent unit) $279,300 $174,637 $156,800 $610,737
Production Cost Report
Particulars Amount
Costs to be accounted for:
Cost of beginning WIP inventory $51,000.00
Cost added to production $653,000.00
Total Cost to be accounted for $704,000.00
Costs accounted for as follows:
Cost of unit transferred out $610,737
Ending WIP:
Material $62,700
Labour $23,523
Overhead $7,040
Total cost accounted for $704,000
Adjusting Journal Entries - Weighted Average
S. No. Particulars Debit Credit
1 Finished goods inventory Dr $610,737.00
          To Work In Process $610,737.00
(Being unit completed transferred to finished goods)

Solution 2:

Computation of Equivalent unit (FIFO)
Particulars Physical units Material Labor Manufacturing Overhead
Units to be accounted for:
Beginning WIP Inventory 10000
Units started this period 50000
Total unit to be accounted for 60000
Units Accounted for:
Units completed and transferred out
From beginning inventory
Material - 0%
Labor - 50%
Overhead - 70%
10000 0 5000 7000
Started and completed currently 39000 39000 39000 39000
Units in ending WIP
Material - 100%
Labor - 60%
Overhead - 20%
11000 11000 6600 2200
Total units accounted for 60000 50000 50600 48200
Computation of Cost per Equivalent unit
Particulars Material Labor Manufacturing Overhead
Current period cost $320,000.00 $180,160.00 $152,840.00
Equivalent units 50000 50600 48200
Cost per equivalent unit $6.40 $3.56 $3.17
Producton cost report - FIFO
Particulars Total cost Material Labor Manufacturing Overhead
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory $51,000 $22,000 $18,000 $11,000
Current cost added to complete beginning WIP:
Material $0 $0
Labor (5000*$3.56) $17,802 $17,802
Manufacturing overhead (7000*$3.17) $22,197 $22,197
Total Cost from beginning inventory $90,999 $22,000 $35,802 $33,197
Current cost of unit started and completed:
Material (39000*$6.40) $249,600 $249,600
Labor (39000*$3.56) $138,858 $138,858
Manufacturing overhead (39000*$3.17) $123,667 $123,667
Total cost of unit started and completed $512,126 $249,600 $138,858 $123,667
Total cost of unit transferred out $603,125 $271,600 $174,661 $156,864
Cost assigned to ending WIP:
Material (11000*$6.40) $70,400 $70,400
Labor (6600*$3.56) $23,499 $23,499
Manufacturing overhead (2200*$3.17) $6,976 $6,976
Total ending WIP inventory $100,875
Total cost accounted for $704,000 $885,200 $547,482 $477,568
Adjusting Journal Entries - FIFO
S. No. Particulars Debit Credit
1 Finished goods inventory Dr $603,125.00
          To Work In Process $603,125.00
(Being unit completed transferred to finished goods)

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