In: Accounting
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).
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) |