Process Costing Using the FIFO Method Solutions to Questions 4S-1 Under the FIFO method, the equivalent units of production include only the work of the current period.. Brief Exerci
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Process Costing Using the FIFO Method
Solutions to Questions
4S-1 Under the FIFO method, the equivalent
units of production include only the work of the
current period The equivalent units of
produc-tion in the beginning inventory are excluded In
contrast, under the weighted-average method,
the equivalent units of production include the
equivalent units that were in beginning
inven-tory as well as the equivalent units due to work
in the current period
4S-2 Under the FIFO method, units
trans-ferred out are divided into two groups The first
group consists of units from the beginning work
in process inventory The second group consists
of units started and completed during the pe-riod
4S-3 The FIFO method is superior to the
weighted-average method from the standpoint
of cost control because current performance should be measured in relation to costs of the current period only, and the weighted-average method mixes the costs of the current period with costs of the prior period Thus, under the weighted-average method, the manager’s per-formance is influenced to some extent by what happened in the prior period
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Brief Exercise 4S-1 (10 minutes)
FIFO Method
Materials Conversion
To complete beginning work in process:
Materials: 30,000 units × (100% − 65%) 10,500
Conversion: 30,000 units × (100% − 30%) 21,000 Units started and completed during October* 160,000 160,000 Ending work in process:
Materials: 15,000 units × 80% complete 12,000
Conversion: 15,000 units × 40% complete 6,000 Equivalent units of production 182,500 187,000
* 175,000 units started – 15,000 units in ending work in process
= 160,000 units started and completed
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FIFO method
Cost added during May (a) $193,320 $62,000 $310,000 Equivalent units of production (b) 27,000 25,000 25,000 Cost per equivalent unit (a) ÷ (b) $7.16 $2.48 $12.40
Cost per equivalent unit for materials $ 7.16
Cost per equivalent unit for labor 2.48
Cost per equivalent unit for overhead 12.40
Total cost per equivalent unit $22.04
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Brief Exercise 4S-3 (15 minutes)
Materials Conversion Total Ending work in process inventory:
Equivalent units of production 400 200
Cost per equivalent unit $2.32 $0.75
Cost of ending work in process inventory $928 $150 $1,078
Units transferred out:
Cost in beginning inventory $3,200 $650 $3,850
Cost to complete the units in beginning inventory:
Equivalent units of production required
to complete the beginning inventory 600 1,200
Cost per equivalent unit $2.32 $0.75
Cost to complete the units in beginning
inventory $1,392 $900 $2,292
Cost of units started and completed this period:
Units started and completed this period
(26,000 units completed and
transferred to the next department
– 2,000 units in beginning work in
process inventory) 24,000 24,000
Cost per equivalent unit $2.32 $0.75
Cost of units started and completed
this period $55,680 $18,000 $73,680 Total cost of units transferred out $79,822
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Mixing Department Cost Reconciliation
Cost of beginning work in process inventory $ 1,460
Costs added to production during the period 36,540
Total cost to be accounted for $38,000
Cost of ending work in process inventory $ 3,120
Cost of units completed and transferred out 34,880 *
Total cost accounted for $38,000
*The cost of units completed and transferred out can be deduced as
follows:
Cost of beginning Costs added Cost of ending Cost of units work in process + to production =work in process + completed and inventory during the period inventory transferred out
Cost of
$1,460 + $36,540 = $3,120 + completed andunits
transferred out Cost of units
completed and = $1,460 + $36,540 - $3,120 transferred out
Cost of units completed and = $34,880 transferred out
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Exercise 4S-5 (10 minutes)
Materials Conversion
To complete beginning work in process:
Materials: 500 units x (100% – 80%) 100
Conversion: 500 units x (100% – 40%) 300 Units started and completed during the period
(153,600 units started – 400 units in ending
inventory) 153,200 153,200 Ending work in process
Materials: 400 units x 75% complete 300
Conversion: 400 units x 20% complete 80 Equivalent units of production 153,600 153,580
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FIFO Method
To complete beginning work in process:
Materials: 5,000 units ×
(100% − 80%) 1,000
Labor: 5,000 units ×
(100% − 60%) 2,000
Overhead: 5,000 units ×
(100% − 60%) 2,000 Units started and completed during the
period* 37,000 37,000 37,000 Ending work in process:
Materials: 8,000 units × 75% 6,000
Labor: 8,000 units × 50% 4,000
Equivalent units of production 44,000 43,000 43,000
* 45,000 units started into production – 8,000 units in ending work
in process = 37,000 started and completed
Cost added during the period (a) $52,800 $21,500 $32,250 Equivalent units of production (b) 44,000 43,000 43,000 Cost per equivalent unit (a) ÷ (b) $1.20 $0.50 $0.75
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Exercise 4S-7 (15 minutes)
FIFO Method
Work in process, June 1 20,000 Started into production during the month 190,000 Total tons in process 210,000 Deduct work in process, June 30 30,000 Completed and transferred out during the month 180,000
Materials Labor and Overhead
To complete beginning work in process:
Materials: 20,000 tons × (100% − 90%) 2,000
Labor and overhead: 20,000 tons ×
(100% − 80%) 4,000 Units started and completed during the
month* 160,000 160,000 Ending work in process:
Materials: 30,000 tons × 60% complete 18,000
Labor and overhead:
30,000 tons × 40% complete 12,000 Equivalent units of production 180,000 176,000
* 190,000 tons started into production – 30,000 tons in ending
work in process = 160,000 tons started and completed
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FIFO Method
1 Computation of the total cost per equivalent unit of production:
Cost per equivalent unit of production for material $25.40 Cost per equivalent unit of production for conversion 18.20 Total cost per equivalent unit of production $43.60
2 Computation of equivalent units in ending inventory:
Units in ending inventory (a) 300 300 Percentage completed (b) 70 % 60 % Equivalent units of production (a) × (b) 210 180
3 Computation of equivalent units required to complete the beginning inventory:
Units in ending inventory (a) 400 400
Percentage completed (b) 20 % 60 % Equivalent units of production (a) × (b) 80 240
4 Units transferred to the next department 3,100
Units from the beginning inventory 400
Units started and completed during the period 2,700
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Exercise 4S-8 (continued)
Ending work in process inventory:
Equivalent units of production 210 180
Cost per equivalent unit $25.40 $18.20
Cost of ending work in process
inventory $5,334 $3,276 $8,610
Units transferred out:
Cost from the beginning work in
process inventory $8,120 $2,920 $11,040
Cost to complete the units in beginning
work in process inventory:
Equivalent units of production
required to complete the units in
beginning inventory 80 240
Cost per equivalent unit $25.40 $18.20
Cost to complete the units in
beginning inventory $2,032 $4,368 $6,400
Cost of units started and completed
this period:
Units started and completed this
period 2,700 2,700
Cost per equivalent unit $25.40 $18.20
Cost of units started and completed
this period $68,580 $49,140 $117,720
Total cost of units transferred out $135,160
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FIFO Method
Materials Overhead Labor &
To complete the beginning work in process:
Materials: 20,000 pounds × (100% − 100%) 0
Labor and overhead:
20,000 pounds × (100% − 30%) 14,000 Pounds started and completed during July* 355,000 355,000 Ending work in process:
Materials: 25,000 pounds × 100% complete 25,000
Labor and overhead:
25,000 pounds × 60% complete 15,000 Equivalent units of production 380,000 384,000
* 380,000 pounds started – 25,000 pounds in ending work in process inventory = 355,000 pounds started and completed this month
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Problem 4S-10A (45 minutes)
FIFO method
1 Equivalent Units of Production
Materials Conversion
To complete beginning work in process:
Materials: 20,000 units x (100% − 100%) 0
Conversion: 20,000 units x (100% − 75%) 5,000 Units started and completed during the period
(180,000 units started − 40,000 units in
ending inventory) 140,000 140,000 Ending work in process:
Materials: 40,000 units x 100% complete 40,000
Conversion: 40,000 units x 25% complete 10,000 Equivalent units of production 180,000 155,000
2 Cost per Equivalent Unit
Materials Conversion
Cost added during the period (a) $334,800 $238,700 Equivalent units of production (b) 180,000 155,000 Cost per equivalent unit (a) ÷ (b) $1.86 $1.54
3 See the next page
4 Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($25,200 + $24,800) $ 50,000 Costs added to production during the period
($334,800 + $238,700) 573,500 Total cost to be accounted for $623,500 Costs accounted for as follows:
Cost of ending work in process inventory $ 89,800 Costs of units transferred out 533,700 Total cost accounted for $623,500
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3 Costs of Ending Work in Process Inventory and Units Transferred Out
Materials Conversion Total
Ending work in process inventory:
Equivalent units of production 40,000 10,000
Cost per equivalent unit $1.86 $1.54
Cost of ending work in process inventory $74,400 $15,400 $89,800 Units transferred out:
Cost in beginning work in process inventory $25,200 $24,800 $50,000 Cost to complete the units in beginning work in process inventory:
Equivalent units of production required to complete the
beginning inventory 0 5,000 Cost per equivalent unit $1.86 $1.54
Cost to complete the units in beginning inventory $0 $7,700 $7,700 Cost of units started and completed this period:
Units started and completed this period 140,000 140,000
Cost per equivalent unit $1.86 $1.54
Cost of units started and completed this period $260,400 $215,600 $476,000 Cost of units transferred out $533,700
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Problem 4S-11A (45 minutes)
FIFO method
1 Equivalent Units of Production
Materials Conversion
To complete beginning work in process:
Materials: 10,000 units x (100% − 100%) 0
Conversion: 10,000 units x (100% − 30%) 7,000 Units started and completed during the period
(170,000 units started − 20,000 units in
ending inventory) 150,000 150,000 Ending work in process:
Materials: 20,000 units x 100% complete 20,000
Conversion: 20,000 units x 40% complete 8,000 Equivalent units of production 170,000 165,000
2 Cost per Equivalent Unit
Materials Conversion
Cost added during the period (a) $139,400 $244,200 Equivalent units of production (b) 170,000 165,000 Cost per equivalent unit (a) ÷ (b) $0.82 $1.48
3 See the next page
4 Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($8,500 + $4,900) $ 13,400 Costs added to production during the period
($139,400 + $244,200) 383,600 Total cost to be accounted for $397,000 Costs accounted for as follows:
Cost of ending work in process inventory $ 28,240 Costs of units transferred out 368,760 Total cost accounted for $397,000
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3 Costs of Ending Work in Process Inventory and Units Transferred Out
Materials Conversion Total
Ending work in process inventory:
Equivalent units of production 20,000 8,000
Cost per equivalent unit $0.82 $1.48
Cost of ending work in process inventory $16,400 $11,840 $28,240 Units transferred out:
Cost in beginning work in process inventory $8,500 $4,900 $13,400 Cost to complete the units in beginning work in process inventory:
Equivalent units of production required to complete the
beginning inventory 0 7,000 Cost per equivalent unit $0.82 $1.48
Cost to complete the units in beginning inventory $0 $10,360 $10,360 Cost of units started and completed this period:
Units started and completed this period 150,000 150,000
Cost per equivalent unit $0.82 $1.48
Cost of units started and completed this period $123,000 $222,000 $345,000 Cost of units transferred out $368,760
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Analytical Thinking (60 minutes)
1
Transferred In Materials Conversion
To complete beginning work in process:
Transferred in: 450 units × (100% − 100%) 0
Materials: 450 units × (100% − 100%) 0
Units started and completed during the period (1,950 units
started − 600 units in ending inventory) 1,350 1,350 1,350 Ending work in process:
Materials: 600 units x 0% complete 0
Conversion: 600 units x 35% complete 210 Equivalent units of production 1,950 1,350 1,740
Transferred In Materials Conversion
Cost added during the period (a) $17,940 $6,210 $13,920 Equivalent units of production (b) 1,950 1,350 1,740 Cost per equivalent unit (a) ÷ (b) $9.20 $4.60 $8.00
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Transferred In Materials Conversion Total
Ending work in process inventory:
Equivalent units of production 600 0 210
Cost per equivalent unit $9.20 $4.60 $8.00
Cost of ending work in process inventory $5,520 $0 $1,680 $7,200 Units transferred out:
Cost in beginning work in process inventory $4,068 $1,980 $2,160 $8,208 Cost to complete units in beginning work in
process inventory:
Equivalent units of production required to
complete the beginning inventory (see above) 0 0 180 Cost per equivalent unit $9.20 $4.60 $8.00
Cost to complete units in beginning
inventory $0 $0 $1,440 $1,440 Cost of units started and completed this period:
Units started and completed this period 1,350 1,350 1,350
Cost per equivalent unit $9.20 $4.60 $8.00
Cost of units started and completed this
period $12,420 $6,210 $10,800 $29,430
2 The effects of the price increases will tend to show up more under the FIFO method The reason is that the FIFO method keeps the costs of the current period separate from the costs of prior periods Thus, under the FIFO method, management will be able to see the effect of price increases on unit costs without any distorting influence from what has happened in the past