Question

Cranberry Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two​ departments: the assembly department and the finishing department. This problem focuses on the assembly department. The​ process-costing system at Cranberry has a single​ direct-cost category​ (direct materials) and a single​ indirect-cost category​ (conversion costs). Direct materials are added when the assembly department process is​ 10% complete. Conversion costs are added evenly during the assembly​ department's process. Cranberry uses the​ weighted-average method of process costing. Consider the following data for the assembly department in April 2017​:

	Physical Units (frames)	Direct Materials	Conversion Costs
Work in process, April 1^a	140	$ 3,190	$ 192
Started during April 2017	505
Completed during April 2017	465
Work in process, April 30^b	180
Total costs added during April 2017		$16,160	$ 9,156

a Degree of​ completion: direct​ materials, 100%; conversion​ costs, 40%.

b Degree of​ completion: direct​ materials,100​%; conversion​ costs, 15​%.

Question:

1.	Summarize total assembly department costs for April 2017​, and assign them to units completed​ (and transferred​ out) and to units in ending work in process.
2.	What issues should a manager focus on when reviewing the equivalent units​calculation?

Answer 1

Statement showing equivalents units using weighted average method

Flow of production	Physical units	Equivalent units
		Direct material	Conversion costs
Work in progress beginning	140
Started during current period	505
To account for	645
Completed and transferred out	465	465	465
Work in progress ending	180
(Degree of completion 100%, 15%)		180	27
Accounted for	645
Equivalent units completed till date		645	492

Statement showing Total costs, costs per equivalent unit and assignment of costs

	Total Production costs	Direct Material costs	Conversion costs
Work in progress beginning	3,382	3,190	192
Cost incurred during April	25,316	16,160	9,156
Total Costs	28,698	19,350	9,348
Cost Incurred till date		19,350	9,348
Divide: Equivalent units of work done till date		645	492
Cost per Equivalent Unit		30 $	19 $
Assignment of Costs:
Completed and transferred out(465)	22,785	13,950	8,835
Work in progress Ending (180)	8,820	5,400	3,420
Total costs accounted for	31,605	19,350	12,255

Working Note:

- Completed and transferred out units are given...and will multiply by cost per equivalent unit(found out in previous step). and the total of Direct material and conversion will become total costs.

2) The manager should focus on following issues

• The Method followed for Inventory valuation. Means he should focus on whether department followed First in First Out(FIFO), First in Last Out (LIFO) or weighted average method.  
• Degree of completion in regarding to Beginning and Ending Work-in-Progress.
• Cost related to Beginning Work In Progress and cost incurred during the period.