Compute the cost of goods transferred out and the cost of goods in ending work-in-process using both the Weighted-Average and the FIFO methods.

Transcription

1 Hawthorne Motor Company rebuilds automobile engines that have been damaged or are in need of extensive repair. The rebuilt engine has a 100,000-mile warranty and is purchased by auto shops, large motor pools in companies and governmental units, and some individual auto owners. The Dayton plant at Hawthorne specializes in the Ford V6 engine. The current month began with a WIP inventory of 200 engines, which were 50 percent complete as to materials and 50 percent complete as to conversion costs. The materials costs in the beginning WIP inventory was $54,860, while the conversion costs was $63, engines were completed and shipped out during the month, and total materials cost of $549,940 and conversion cost of $640,000 were incurred during the month. The ending WIP inventory was 200 engines 20 percent complete as to materials and 40 percent complete as to conversion cost. Data for analysis: Beginning WIP inventory--units 200 % complete--materials content 50% % complete--conversion cost 50% Beginning WIP inventory--costs: Materials $54,860 Conversion $63,000 No. of units completed and shipped out during the month 600 Production costs incurred during the month: Materials $549,940 Conversion $640,000 Stage of completion, ending WIP Inventory: Materials 20% Conversion 40% Compute the cost of goods transferred out and the cost of goods in ending work-in-process using both the Weighted-Average and the FIFO methods.

2 FIFO Physical Units Beginning Inventory 200 Started during the period 600 To account for 800 Completed and Transferred Out 700 Ending Inventory 100 Equivalent Units Materials Conversion Units accounted for 800 %Beginning Inventory complete 50% 50% %Ending Inventory complete 20% 40% Work done this period Completing beginning inventory Started and Completed Ending inventory Beginning Inventory Costs 54, , , Costs added 549, , ,189, ,307, Equivalent units , Completed and transferred out Beginning Inventory 54, , , Cost to complete 88, , , Started and completed 443, , , , , ,250, Ending Inventory 17, , , ,307,800.00

3 Weighted-Average Physical Units Beginning Inventory 200 Started during the period 600 To account for 800 Materials Equivalent Units Conversion Completed and Transferred Out Ending Inventory Units accounted for (Equivalent units) %Ending Inventory complete 20% 40% Beginning Inventory Costs 54, , , Costs added 549, , ,189, costs to date 604, , ,307, Equivalent units Completed and transferred out 588, , ,253, Ending Inventory 16, , , ,307,800.00

4 South Atlantic Pulp Company processes wood pulp for manufacturing various paper products. The company employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. This is the company s production schedule for May: PERCENT COMPLETE Tons of Pulp Materials Conversion Work-in-process inventory, May 1 6, % 20% Started during May 15,000 Units to account for 21,000 Units transferred out during May 18,000 Work-in-process inventory, May 31 3, % 50% units account for 21,000 The cost data are as follows: Work-in-process inventory, May 1 Direct materials $93,750 Conversion $124,800 Costs incurred during May Direct materials $221,250 Conversion $356,850 Compute the cost of goods transferred out and the cost of goods in ending Work-In-Process using (1) FIFO and (2) Weighted-Average.

5 Weighted-Average Physical Units Beginning Inventory 6000 Started during the period To account for Materials Equivalent Units Conversion Completed and Transferred Out Ending Inventory Units accounted for (Equivalent units) %Ending Inventory complete 100% 50% Beginning Inventory Costs 93, , , Costs added 221, , , costs to date 315, , , Equivalent units 21, , Completed and transferred out 270, , , Ending Inventory 45, , , ,650.00

6 FIFO Physical Units Equivalent Units Materials Conversion Beginning Inventory 6000 Started during the period To account for Completed and Transferred Out Ending Inventory 3000 Units accounted for (Equivalent units) %Beginning Inventory complete 100% 20% %Ending Inventory complete 100% 50% Work done this period Completing beginning inventory Started and Completed Ending inventory Beginning Inventory Costs 93, , , Costs added 221, , , , Equivalent units 15, , Completed and transferred out Beginning Inventory 93, , , Cost to complete - 93, , Started and completed 177, , , , , , Ending Inventory 44, , , ,650.00