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Problem 16

Assuming beginning work in process is zero, the equivalent units of production computed using FIF0 versus weighted average will have the following relationship: 1\. FIF0 equivalent units will be greater than weighted-average equivalent units. 2\. FIFO equivalent units will be less than weighted-average equivalent units. 3\. Weighted-average equivalent units are always greater than FIF0 equivalent units. 4\. Weighted-average equivalent units will be equal to FIF0 equivalent units.

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2. FIFO equivalent units will be less than weighted-average equivalent units.

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Chapter 17

Name the five steps in process costing when equivalent units are computed.

Chapter 17

Transferred-in costs, weighted-average method. Spelling Sports, which produces basketballs, has two departments: cutting and stitching. Each department has one direct-cost category (direct materials) and one indirect-cost category (conversion costs). This problem focuses on the stitching department. Basketballs that have undergone the cutting process are immediately transferred to the stitching department. Direct material is added when the stitching process is \(70 \%\) complete. Conversion costs are added evenly during stitching operations. When those operations are done, the basketballs are immediately transferred to Finished Goods. Spelling Sports uses the weighted-average method of process costing. The following is a summary of the March 2017 operations of the stitching department: $$\begin{array}{|l|l|c|c|c|c|} \hline & \multicolumn{2}{|c|} {\text { A }} & \multicolumn{1}{c|} {\text { B }} & \multicolumn{1}{c|} {\text { C }} & \multicolumn{1}{c|} {\text { D }} & \multicolumn{1}{c|} {\text { E }} \\ \hline & & \begin{array}{c} \text { Physical Units } \\ \text { (basketballs) } \end{array} & \begin{array}{c} \text { Transferred-In } \\ \text { costs } \end{array} & \begin{array}{c} \text { Direct } \\ \text { Materials } \end{array} & \begin{array}{c} \text { Conversion } \\ \text { costs } \end{array} \\ \hline 2 & \text { Beginning work in process } & 17,500 & \$ 45,360 & \$ & 0 & \$ 17,660 \\ \hline 3 & \text { Degree of completion, beginning work in process } & & 100 \% & 0 \% & 60 \% \\ \hline 4 & \text { Transferred in during March 2017 } & 56,000 & & & \\ \hline 5 & \text { Completed and transferred out during March 2017 } & 52,000 & & & \\ \hline 6 & \text { Ending work in process, March 31 } & 21,500 & & & \\ \hline 7 & \text { Degree of completion, ending work in process } & & 100 \% & 0 \% & 20 \% \\ \hline 8 & \text { Total costs added during March } & \$ 154,560 & \$ 28,080 & \$ 89,310 \\ \hline \end{array}$$ 1\. Summarize total stitching department costs for March 2017 , and assign these costs to units completed (and transferred out) and to units in ending work in process. 2\. Prepare journal entries for March transfers from the cutting department to the stitching department and from the stitching department to Finished Goods.

Chapter 17

Weighted-average method. McKnight 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 McKnight 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. McKnight uses the weighted-average method of process costing. Consider the following data for the assembly department in April 2017: $$\begin{array}{lcccc} & \begin{array}{c} \text { Physical Unit } \\ \text { (Frames) } \end{array} & \begin{array}{c} \text { Direct } \\ \text { Materials } \end{array} & \begin{array}{c} \text { Conversion } \\ \text { costs } \end{array} \\ \hline \text { Work in process, April 1 }^{\text {a }} & 60 & \$ 1,530 & \text { S } & 156 \\ \text { Started during April 2017 } & 510 & & & \\ \text { Completed during April 2017 } & 450 & & & \\ \text { Work in process, April 30 }^{\text {b }} & 120 & & & \\ \text { Total costs added during April 2017 } & & \text { \$17,850 } & \text { S11,544 } \end{array}$$ 1\. Summarize the 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?

Chapter 17

Standard costing, journal entries. The Warner Company manufactures reproductions of expensive sunglasses. Warner uses the standard-costing method of process costing to account for the production of the sunglasses. All materials are added at the beginning of production. The costs and output of sunglasses for May 2017 are as follows: $$\begin{array}{lcccc} & \begin{array}{c} \text { Physical } \\ \text { Units } \end{array} & \begin{array}{c} \text { \% of Completion for } \\ \text { Conversion costs } \end{array} & \begin{array}{c} \text { Direct } \\ \text { Materials } \end{array} & \begin{array}{c} \text { Conversion } \\ \text { costs } \end{array} \\ \hline \text { Work in process, beginning } & 22,000 & 60 \% & \$ 48,400 & \$ 33,000 \\ \text { Started during May } & 95,000 & & & \\ \text { Completed and transferred out } & 87,000 & & & \\ \text { Work in process, ending } & 30,000 & 75 \% & & \\ \text { Standard cost per unit } & & \$ & 2.20 & \$ & 2.50 \\ \text { costs added during May } & & \$ 207,500 & \$ 238,000 \end{array}$$ 1\. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule. 2\. Compute the total standard costs of sunglasses transferred out in May and the total standard costs of the May 31 inventory of work in process. 3\. Compute the total May variances for direct materials and conversion costs. 4\. Prepare summarized journal entries to record both the actual costs and standard costs for direct materials and conversion costs, including the variances for both production costs.

Chapter 17

Transferred-in costs, weighted-average method. Trendy Clothing, Inc. is a manufacturer of winter clothes. It has a knitting department and a finishing department. This exercise focuses on the finishing department. Direct materials are added at the end of the process. Conversion costs are added evenly during the process. Trendy uses the weighted-average method of process costing. The following information for June 2017 is available. $$\begin{array}{|l|l|c|c|c|c|} \hline & \multicolumn{1}{|c|} {\text { A }} & \multicolumn{1}{c|} {\text { B }} & \multicolumn{1}{c|} {\text { C }} & \multicolumn{1}{c|} {\text { D }} & \multicolumn{1}{c|} {\text { E }} \\ \hline & & \begin{array}{c} \text { Physical Units } \\ \text { (tons) } \end{array} & \begin{array}{c} \text { Transferred-In } \\ \text { costs } \end{array} & \begin{array}{c} \text { Direct } \\ \text { Materials } \end{array} & \begin{array}{c} \text { Conversion } \\ \text { costs } \end{array} \\ \hline 2 & \text { Work in process, beginning inventory (June 1) } & 60 & \$ 60,000 & \$ & 0 & \$ 24,000 \\ \hline 3 & \text { Degree of completion, beginning work in process } & & 100 \% & 0 \% & 50 \% \\ \hline 4 & \text { Transferred-in during June } & 100 & & & \\ \hline 5 & \text { Completed and transferred out during June } & 120 & & & \\ \hline 6 & \text { Work in process, ending inventory (June 30) } & 40 & & & \\\ \hline 7 & \text { Degree of completion, ending work in process } & & 100 \% & 0 \% & 75 \% \\ \hline 8 & \text { Total costs added during June } & \$ 117,000 & \$ 27,000 & \$ 62,400 \\ \hline \end{array}$$ 1\. Calculate equivalent units of transferred-in costs, direct materials, and conversion costs. 2\. Summarize the total costs to account for, and calculate the cost per equivalent unit for transferred-in costs, direct materials, and conversion costs. 3\. Assign costs to units completed (and transferred out) and to units in ending work in process.

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