Question

Company X makes a product that goes through a single processing department. Direct Materials are added at the start of the process, while Conversion Costs are added evenly during the process. Company X uses the FIFO method of Process Costing.

During last month, Company X had 8,700 units in beginning Work-in-Process Inventory which were 100% complete for materials and 25% complete for conversion. There were 34,500 units started during the period. After finishing the 8,700 units in beginning Work-in-Process Inventory, the company started and completed 23,300 units. (That means the total units transferred to Finished Goods for the period was 8,700 + 23,300 = 32,000 units.) T Company had 11,200 units in ending Work-in-Process Inventory which were 100% complete for materials and 70% complete for conversion.

The beginning Work-in-Process Inventory had a value of $101,093.25 (which was $69,630 of materials and $31,463.25 of conversion). During the month, costs added were $803,610.75 (which was $293,250 of materials and $510,360.75 of conversion).

(a) Calculate the dollar cost of items transferred out of Work-in-Process Inventory and into Finished Goods Inventory for the month using the FIFO method of Process Costing.

(b) Calculate the dollar cost of items in Ending Inventory at the end of the month using the FIFO method of Process Costing.

Now assume all of the above EXCEPT that Company X uses the Weighted Average method of Process Costing.

(c) Calculate the dollar cost of items transferred out of Work-in-Process Inventory and into Finished Goods Inventory for the month using the Weighted Average method of Process Costing.

(d) Calculate the dollar cost of items in Ending Inventory (at the end of the month) using the Weighted Average method of Process Costing.

Answer 1

• All working forms part of the answer
• Requirement 1: USING FIFO Method

EUP - FIFO Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units of ENDING WIP	11,200	100%	11,200	70%	7,840
Units STARTED & COMPLETED	23,300	100%	23,300	100%	23,300
Units of beginning WIP	8,700	0%	-	75%	6,525
Equivalent Units of Production			34,500		37,665
COST per EUP			Material		Conversion
Cost incurred this period			$       293,250.00		$                  510,360.75
Total Costs		Costs	$       293,250.00	Costs	$                  510,360.75
Equivalent units of production		EUP	34,500	EUP	37,665
Cost per EUP			$             8.50000		$                     13.55000
COST ASSIGNMENT & RECONCILIATION
Cost Transferred out:	EUP	Cost per EUP	Total Cost
Cost of Beginning WIP			$       101,093.25
Cost to complete beginning WIP-
- Direct Materials	-	$                   8.50	$                         -
- Conversion	6,525	$                 13.55	$          88,413.75
Total cost to complete beginning WIP			$       189,507.00
Cost of Units started & completed this period:	EUP	Cost per EUP	Total Cost
- Direct Materials	23,300	$                   8.50	$       198,050.00
- Conversion	23,300	$                 13.55	$       315,715.00
Total costs started & Completed this period			$       513,765.00
Total cost of work finished this period				$      703,272.00 [Answer ‘a’]
Costs of Ending WIP:	EUP	Cost per EUP	Total Cost
- Direct Materials	11,200	$                   8.50	$          95,200.00
- Conversion	7,840	$                 13.55	$       106,232.00
Total cost of ending WIP				$      201,432.00 [Answer ‘b’]
Total costs accounted for				$      904,704.00

---Answer to Part ‘a’: Cost of Units transferred = $ 703,272

---Answer to Part ‘b’: Cost of ending WIP Inventory = $ 201,432

• Requirement 2: USING WEIGHTED AVERAGE METHOD

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	32,000	100%	32,000	100%	32,000
Units of ENDING WIP	11,200	100%	11,200	70%	7,840
Equivalent Units of Production			43,200		39,840
COST per EUP			Material		Conversion
Cost of Beginning WIP			$        69,630.00		$          31,463.25
Cost incurred during the period			$      293,250.00		$        510,360.75
Total Costs		Costs	$      362,880.00	Costs	$        541,824.00
Equivalent units of production		EUP	43,200	EUP	39,840
Cost per EUP			$                   8.40		$                  13.60
TOTAL COST ACCOUNTED FOR
Cost of Units Transferred Out	EUP	Cost per EUP	Total Cost
- Direct Materials	32,000	$       8.40	$      268,800.00
- Conversion	32,000	$    13.60	$      435,200.00
Total Cost transferred Out				$            704,000.00
Costs of Ending WIP:	EUP	Cost per EUP	Total Cost
- Direct Materials	11,200	$       8.40	$        94,080.00
- Conversion	7,840	$    13.60	$      106,624.00
Total cost of ending WIP				$            200,704.00
Total costs accounted for					$        904,704.00

---Answer to Part ‘a’: Cost of Units transferred = $ 704,000

---Answer to Part ‘b’: Cost of ending WIP Inventory = $ 200,704