acoutning ch 8

7/23/2019 Acoutning Ch 8

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Missouri Corporation shows the following information concerning the work in process at its plant:

Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are60 percent complete).

Started this month, 180,000 units. Transferred out, 150,000 units. Ending inventory, 100,000 units (materials are 100 percent complete; conversion costs are 15 percent

complete).

Required:(a)Compute the equivalent units for materials using the weighted-average method.

Equivalent units 250,000

(b)Compute the equivalent units for conversion costs using the weighted-average method.


Explanation:Materials

ConversionCosts

Unitstransferredout

150,000 150,000

Equivalentunits in endinginventory:

Materials:100% 100,000 units

100,000

Conversioncosts: 15% 100,000 units

15,000

Totalequivalentunits for allwork done todate

250,000 165,000

Missouri Corporation shows the following information concerning the work in process at its plant:

Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are60 percent complete).

Started this month, 180,000 units. Transferred out, 150,000 units. Ending inventory, 100,000 units (materials are 100 percent complete; conversion costs are 15 percent

complete).

Required:(a)Compute the equivalent units for materials using FIFO.


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(b)Compute the equivalent units for conversion costs using FIFO.


Explanation:Materials Conversion Costs

To completebeginninginventory:

Materials:0%b 70,000a units

0 EU

Conversion costs:40%c

70,000 units

28,000 EU

Started andcompletedduring theperiod

80,000 EUd 80,000 EU

Units still inendinginventory:

Materials:100% 100,000 units

100,000 EU

Conversion costs: 15%

100,000units

15,000 EU

180,000 EU 123,000 EU

a 70,000 units in beginning inventory= 150,000 units transferred out + 100,000 units in ending inventory 180,000 units started this period.0% = 100% 100% already done at the beginning of the period.

c 40% = 100% 60% already done at the beginning of the period.80,000 units started and completed = 150,000 units transferred out less 70,000 units from beginning

inventory.

Aaron Company has a process costing system. All materials are introduced when conversion costs reach50 percent. The following information is available for physical units during March.


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Work in process, March 1 (60% complete as to conversion costs) 150,000Units started in March 600,000Units transferred to Finishing Department in March 630,000Work in process, March 31 (40% complete as to conversion costs) 120,000

Requirement 1:Compute the equivalent units for materials costs and for conversion costs using the weighted-averagemethod.

Equivalent units

Materials 630,000

Conversion costs 678,000

Requirement 2:Compute the equivalent units for materials costs and for conversion costs using the FIFO method.

Equivalent units

Materials 480,000

Conversion costs 588,000

Requirement 3:The company president has been under considerable pressure to increase income. He tells the controllerto change the estimated completion for ending work in process to 60 percent (from 40 percent).

(a)What effect will this change have on the unit costs of units transferred to finished goods in March?

The change will reduce the unit cost for the units transferred to finished goods.

(b)Would this be ethical?

No

(c)Is this likely to be a successful strategy for affecting income over a long period of time?

No

Explanation:1:Weighted-average method:

MaterialsConversion

CostsUnits transferred

out630,000 630,000

Equivalent units inending inventory:

Materials: 0% 120,000 units

0

Conversion 48,000


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costs: 40% 120,000 units

Total equivalentunits for all workdone to date

630,000 678,000

2:First-in, First-out (FIFO) method:

Materials Conversion CostsTo complete

beginninginventory:

Materials:0%a 150,000 units

0 EU

Conversion costs:40%b 150,000 units

60,000 EU

Started andcompletedduring theperiod

c

480,000 EU 480,000 EU

Units still inendinginventory:

Materials:0%

120,000 units

0 EU

Conversion costs: 40% 120,000units

48,000 EU

480,000 EU 588,000 EU

a 0% = 100% 100% already done at the beginning of the period (conversion was 60% complete).b 40% = 100% 60% already done at the beginning of the period.c

480,000 units started and completed = 630,000 units transferred out less 150,000 units from beginninginventory.

3:(a)The change will reduce the unit cost for the units transferred to finished goods.

(b)It is not ethical; there is no reason to believe the change reflects anything other than a desire forreporting better results.


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(c)It is unlikely to be successful for long. An accounting system keeps track of actual costs. If a managerpostpones reporting them this period, they will be reported next period or shortly thereafter.The Matsui Lubricants plant uses the weighted-average method to account for its work-in-processinventories. The accounting records show the following information for a particular day:

Beginning WIP inventoryDirect materials $ 976Conversion costs 272

Current period costsDirect materials 11,440Conversion costs 6,644

Quantity information is obtained from the manufacturing records and includes the following:

Beginning inventory 600 units (60% complete as to materials,53% complete as to conversion)

Current period unitsstarted

4,000 units

Ending inventory 1,200 units (40% complete as to materials,20% complete as to conversion)

Required:Compute the cost per equivalent unit for direct materials and conversion costs using the weighted-average method. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Cost per EU

Materials $3.20

Conversion costs $1.90

Explanation:

PhysicalUnits Equivalent Units

MaterialsConversion

CostsFlow of units:

Units to beaccounted for:

BeginningWIP inventory

600

Unitsstarted thisperiod

4,000


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Total

units toaccount for

4,600

Unitsaccounted for:

Completedand transferredouta

3,400 3,400 3,400

Units inendinginventory:

1,200

Materials(1,200 40%)

480

Conversion costs (1,200 20%)

240

Totalunitsaccounted for

4,600 3,880 3,640

a3,400 units transferred out = 4,600 units to account for 1,200 units in ending WIP inventory.

TotalDirect

MaterialsConversion

CostsFlow of

costs:Costs to

beaccounted for:

Costsinbeginning WIPinventory

$ 1,248 $ 976 $ 272

Current periodcosts

18,084 11,440 6,644

Total coststo beaccounted for

$ 19,332 $ 12,416 $ 6,916

Costper


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equivalent unit

Materials($12,416 3,880units)

$ 3.20

Conversioncosts($6,916 3,640units)

$ 1.90

2011 The McGraw-Hill Companies. All rights reserved.

5.award:

0 out of10.00 points

The Matsui Lubricants plant uses the weighted-average method to account for its work-in-processinventories. The accounting records show the following information for a particular day:




Beginning inventory 600 units (60% complete as to materials,

53% complete as to conversion)Current period units

started4,000 units


Required:Compute the cost of goods transferred out and the ending inventory using the weighted-averagemethod.(Round unit costs for materials and conversion to 2 decimal places and the final answers


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to the nearest dollar amount. Omit the "$" sign in your response.)

Cost of goods transferred out $17,340

Costs in ending inventory $1,992

Explanation:

PhysicalUnits Equivalent Units

MaterialsConversion

CostsFlow of units:

Units to beaccounted for:

BeginningWIP inventory

600


4,000

Totalunits toaccount for

4,600

Unitsaccounted for:

Completedand transferred

outa

3,400 3,400 3,400

Units inendinginventory:

1,200

Materials(1,200 40%)

480

Conversion costs (1,200 20%)

240


4,600 3,880 3,640

a3,400 units transferred out = 4,600 units to account for 1,200 units in ending WIP inventory.

TotalDirect

MaterialsConversion

CostsFlow of

costs:


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Costs tobeaccounted for:

Costsinbeginning WIPinventory

$ 1,248 $ 976 $ 272

Current periodcosts

18,084 11,440 6,644


$ 19,332 $ 12,416 $ 6,916

Costperequivalent unit


$ 3.20

Conversion

costs($6,916 3,640units)

$ 1.90

Costsaccounted for:

Costsassignedto unitstransferr

ed out

$ 17,340 $ 10,880

a

$ 6,460

Costof endingWIPinventory

1,992 1,536

c

456

d

Total costsaccounted for

$ 19,332 $ 12,416 $ 6,916


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Costs transferred out total $17,340, and costs in ending inventory total $1,992.a $10,880 = 3,400 EU $3.20 per EU.

$6,460 = 3,400 EU $1.90 per EU.c $1,536 = 480 EU $3.20 per EU.

$456 = 240 EU $1.90 per EU.The Matsui Lubricants plant uses the FIFO method to account for its work-in-process inventories. Theaccounting records show the following information for a particular day:





Current period units started 4,000 unitsEnding inventory 1,200 units (40% complete as to materials,

20% complete as to conversion)

Required:Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFOmethod.(Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Cost per EU

Direct materials $3.25

Conversion costs $2.00

Explanation:Physical

Units Equivalent Units

Materials

Conversion

CostsFlow ofunits:

Units tobe accountedfor:

Beginning WIPinventory

600

Units 4,000


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started thisperiod


4,600

Unitsaccountedfor:

Completed andtransferredout a

3,400

FrombeginningWIPinventory

Ma

terials (600 (1 60%))

240

Conversion (600 (1 53%))

282

Started andcompletedcurrently(2,800 100%)

2,800 2,800

Units inending

inventory

1,200

Materials (1,200 40%)

480

Conversion costs(1,200 20%)

240


4,600 3,520 3,322

a 3,400 units transferred out = 4,600 units to account for 1,200 units in ending WIP inventory.

TotalDirect

MaterialsConversion

CostsFlow of

costs:Costs to


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beaccounted for:

CostsinbeginningWIPinventory

$ 1,248 $ 976 $ 272

Current periodcosts

18,084 11,440 6,644


$ 19,332 $ 12,416 $ 6,916

Cost per

equivalentunit


$ 3.25

Conversioncosts($6,644

3,322units)

$ 2.00

The Matsui Lubricants plant uses the FIFO method to account for its work-in-process inventories. Theaccounting records show the following information for a particular day:


Current period costs

Direct materials 11,440Conversion costs 6,644



Current period units started 4,000 units


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Required:Compute the cost of goods transferred out and the ending inventory using the FIFO method. (Roundunit costs for materials and conversion to 2 decimal places and the final answers to the nearestdollar amount. Omit the "$" sign in your response.)

Cost of goods transferred out $17,292

Cost of ending inventory $2,040

Explanation:Physical

Units Equivalent Units

MaterialsConversion

CostsFlow of

units:Units to

be accountedfor:

Beginning WIPinventory

600


4,000


4,600

Unitsaccountedfor:

Completed andtransferredout

a

3,400

FrombeginningWIPinventory

Materials (600 (1 60%))

240

Conversion (600 (1 53%))

282


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Started andcompletedcurrently(2,800 100%)

2,800 2,800

Units inendinginventory

1,200

Materials (1,200 40%)

480

Conversion costs(1,200 20%)

240


4,600 3,520 3,322

a 3,400 units transferred out = 4,600 units to account for 1,200 units in ending WIP inventory.

TotalDirect

MaterialsFlow of costs:Costs to be accounted

for:Costs in beginning

WIP inventory$ 1,248 $ 976

Current period costs 18,084 11,440

Total costs to beaccounted for

$ 19,332 $ 12,416

Cost per equivalent unitMaterials ($11,440

3,520 units)$ 3.25

Conversion costs($6,644 3,322 units)

Costs accounted for:Costs assigned to

units transferred out:Costs from

beginning WIP inventory$ 1,248 $ 976

Current costsadded to completebeginning WIP inventory

1,344


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Materials($3.25 240)

780

Conversioncosts ($2.00 282)

Current costs ofunits started andcompleted:

14,700

Materials($3.25 2,800)

9,100

Conversioncosts ($2.00 2,800)

Total costs transferredout

$ 17,292 $ 10,856

Cost of ending WIPinventory

2,040

Materials($3.25 480)

1,560

Conversioncosts ($2.00 240)

Total costsaccounted for

$ 19,332 $ 12,416

Ending inventory is slightly higher under the FIFO method because the unit costs are higher under FIFO.

acoutning ch 8

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