18-36 Weighted Average cost
1. For each cost category, compute equivalent units in the assembly department. Show
physical units in the first column of your schedule.
Flow of Production Physical Units Direct Materials Conversion Costs
Work in process, beginning 5.000
Started during current period 20.000
To account for 25.000
Completed and transferred 22.500 22.500 22.500
out during current period
Work in process, ending 2.500
2,500 x 100%;2,500 x 70% 2.500 1.750
Accounted for 25.000
Equivalent units of work 25.000 24.250
done to date
2. What issues should the manager focus on when reviewing the equivalent unit calculation?
Answer: Managers should ask the supervisors about how they estimate the degree of
completion and also top management should always emphasize obtaining the correct
answer regardless of how it affects reported performance.
3. For each cost category, summarize total assembly department costs for October 2020 and
calculate the cost per equivalent unit
Answer:
Total Production Direct Materials Conversion Costs
Costs
Work in Process,
beginning $ 1.652.750 $ 1.250.000 $ 402.750
Costs added in
current period $ 6.837.500 $ 4.500.000 $ 2.337.500
Total costs to
account for $ 8.490.250 $ 5.750.000 $ 2.740.250
Costs incurred to
date $ 5.750.000 $ 2.740.250
Divide by equivalent
units of work done
to date $ 25.000 $ 24.250
Costs per equivalent
unit $ 230 $ 113
4. Assign costs to units completed and transferred out and to units in ending work in process.
Answer:
Total Production Direct Materials Conversion Costs
Costs
Assignment of Costs
Completed and
transferred out $ 7.717.500 $ 5.175.000 $ 2.542.500
Work in process, ending $ 772.750 $ 575.000 $ 197.750
Total costs accounted
for $ 8.490.250 $ 5.750.000 $ 2.740.250
18-37 Journal Entries
Direct Materials Purchased and used in production in October
Work in process—Assembly Department $4,500,000
Accounts Payable $4,500,000
Conversion Costs Incurred in October
Work in process—Assembly Department $2,337,500
Various Accounts $2,337,500
Cost of Goods Completed and Transferred Out in October
Work in process—Testing Department $7,717,500
Work in process—Assembly Department $7,717,500
Work in Process--Assembly Department
Transferred $
Beginning Inventory $ 1.652.750 out to Work in 7.717.500
process testing
Direct Materials $ 4.500.000
Conversion Costs $ 2.337.500
Ending Inventory $ 772.750
18-38 FIFO Method
Direct
Flow of Production Physical Units Materials Conversion Costs
Work in process, beginning 5.000 Work done before period
Started during current period 20.000
To account for 25.000
Completed and transferred out during
current period
From beginning work in process
5,000 x (100%-100%) ; 5,000 x (100% -
5.000 0 2.000
60%)
Started and completed
17,500 x 100% ; 17,500 x 100% 17.500 17.500 17.500
Work in process, ending 2.500
2,500 x 100%;2,500 x 70% 2.500 1.750
Accounted for 25.000
Equivalent units of work done to date 20.000 21.250
Total Production Direct Materials Conversion Costs
Costs
Work in Process, beginning $ 1.652.750 $ 1.250.000 $ 402.750
Costs added in current period $ 6.837.500 $ 4.500.000 $ 2.337.500
Total costs to account for $ 8.490.250 $ 5.750.000 $ 2.740.250
Costs incurred to date $ 4.500.000 $ 2.337.500
Divide by equivalent units of
work done to date $ 20.000 $ 21.250
Costs per equivalent unit $ 225 $ 110
Assignment of Costs
Completed and transferred out
Work in process, beginning $ 1.652.750 $ 1.250.000 $ 402.750
Costs added to beg. Work
process in current period $ 220.000 $ - $ 220.000
Total from beginning
inventory $ 1.872.750
Started and completed $ 5.862.500 $ 3.937.500 $ 1.925.000
Total costs of units
completed and tranferred out $ 7.735.250
Work in process, ending $ 755.000 $ 562.500 $ 192.500
Total costs accounted for $ 8.490.250 $ 5.750.000 $ 2.740.250
Cost per equivalent unit (Weighted average)
Direct materials: $230
Conversion costs: $113
Cost per equivalent unit (FIFO Method)
Direct materials: $225
Conversion costs: $110
Both of the method results in different number because FIFO uses the costs added during the
current period, whereas weighted-average uses the costs from the beginning work in process as well
as costs added during the current period.
No 2. Maybe Larsen’s managers could consider the FIFO method to lower its taxes, even though it
will result lower operating income and higher cost of goods sold. FIFO also provide better
information because it keeps separate the costs of the current period from costs incurred in
previous periods.
18-47 Benchmarking, ethics.
1. Recalculate the cost per equivalent unit, assuming the actual percentage of completion of
ending work in process was 80% for direct materials and 50% for conversion costs.
Pyhsical Direct Conversion
Units Materials Costs
Completed and transferred 30.000 30.000 30.000
out during current period
Work in Process, ending 10.000
10,000 x 80%: 10,000 x
8.000 5.000
50%
Accounted for 40.000
Equivalent units 38.000 35.000
2. Based on the correct percentage of completion computed in requirement 1, recalculate cost
of goods completed and transferred out and the cost of ending work in process inventory.
Conversion
Total Production Direct Materials
Costs
Costs
Costs incurred to date $ 114.000 $ 225.700
Divide by equivalent units
of work done to date $ 38.000 $ 35.000
Costs per equivalent unit $ 3,00 $ 6,45
Assignment of Costs
Completed and
transferred out $ 283.457 $ 90.000 $ 193.457
Work in process, ending $ 56.243 $ 24.000 $ 32.243
Total costs accounted for $ 339.700 $ 114.000 $ 225.700
3. Why might managers manipulate their quarterly estimates of percentage of completion?
Explain
Answer: When the managers overestimate the degree of completion it will lower the costs
of equivalent for both direct materials and conversion costs and also decreases the costs
assigned to goods transferred out and eventually to cost of goods sold and increases
operating income. The managers maybe want some bonuses from the increases of operating
income so they manipulate the degree of completion.
4. What is the ethical responsibility of each plant controller?
Answer: The ethical responsibility of each plant controller is competence to make equivalent
unit computation, provide correct data, and objective on communicating information.
5. What should the corporate controller do?
Answer: The corporate controller should be stricter against any manipulations in production
and always reminds each plant controller to stick to integrity.
6. How might the corporate controller learn whether the data provided by particular plants are
being manipulated?
Answer: The corporate controller has to examine the trends in ending work in process, make
sure the plant controller report in detail about the production, and do audit for the ending
work in process.
19-29 Weighted Average Method, Spoilage
1. For each cost category, compute equivalent units. Show physical units in the first column of
your schedule.
Flow of Production Physical Units Direct Materials Conversion Costs
Work in process, beginning 1.200
Started during current period 2.257
To account for 3.457
Goods units completed and
transferred out during current 2.300 2.300 2.300
period
Normal Spoilage 345
345 x 100%; 345:100% 345 345
Abnormal Spoilage 292
292 x 100%;292 x 100% 292 292
Work in process, ending 520
520 x 100%;520 x 20% 520 104
Accounted for 3.457
Equivalent units of work 3.457 3.041
done to date
2. Summarize the total costs to account for; calculate the cost per equivalent unit for each cost
category; and assign costs to units completed and transferred out (including normal
spoilage), to abnormal spoilage, and to units in ending work in process
Total
Direct Conversion
Production
Materials Costs
costs
Work in process, beginning 158.635 142.321 16.314
Costs added in current period 830.654 573.278 257.376
total costs to account for 989.289 715.599 273.690
Costs incurred to date 715.599 273.690
Divide by equivalent units of work
done to date 3.457 3.041
Cost per equivalent unit 207 90
Assignment of costs
Good units completed and transferred
out
Costs before adding normal spoilage 683.100 476.100 207.000
Normal spoilage 102.465 71.415 31.050
Total costs of good units
completed and transferred out 785.565
Abnormal spoiled 86.724 60.444 26.280
Work in process, ending 117.000 107.640 9.360
Total costs accounted for 989.289 715.599 273.690
19-40 Spoilage in Job Costing
1. What is the normal spoilage rate?
Unit of normal spoilage / total goods units completed
= 6 / 40
= 15%
2. Prepare the journal entries to record the normal spoilage, assuming the following: a. The
spoilage is related to a specific job. b. The spoilage is common to all jobs. c. The spoilage is
considered to be abnormal spoilage
a. Journal entry for spoilage related to a specific job
Material control 6 x $235 $1,410
Work in process $1,410
b. Journal entry for spoilage common to all jobs:
Materials control $1,410
Manufacturing overhead control $5,190
Work in process $6 x $1100 $6,600
c. Journal entry for abnormal spoilage
Materials control $1,410
Loss from abnormal spoilage $5,190
Work in process control $6,600
19-41 Rework in Job Costing, Journal Entry
a. The rework is related to a specific job
Work in process control $1,800
Various Accounts $1,800
b. The rework is common to all job
Manufacturing overhead control $1,800
Various accounts $1,800
c. The rework is considered to be abnormal
Loss from abnormal rework $1,800
Various accounts $1,800