Aaron Company has a process costing system. All materials are introduced when co

Question

Aaron Company has a process costing system. All materials are introduced when conversion costs reach 50 percent. The following information is available for physical units during March.

Required

Compute the equivalent units for materials costs and for conversion costs using the weighted-average method.

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

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

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

Would this be ethical?

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

(Lanen 310)

Lanen, William, Shannon Anderson, Michael Maher. Fundamentals of Cost Accounting, 5th Edition. McGraw-Hill Learning Solutions, 01/2016. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.

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

Explanation / Answer

FIFO method Beggining units 150000 Transferred out 6,30,000 Started into production 600000 Ending units 1,20,000 750000 750000 Equivalent units Material Conversion Beginning units 150000 150000 Completion in current period 0% 40% A 0 60000 Units started and completed 480000 480000 Completion 100% 100% B 480000 480000 Ending Units 1,20,000 1,20,000 Completion 100% 40% C 120000 48000 Total units A+B+C 600000 588000 Weighted average cost Beggining units 150000 Transferred out 6,30,000 Started intro production 600000 Ending units 1,20,000 Units accounted for 750000 750000 Equivalent units Material Conversion cost Units transferred                      A 630000 630000 Ending Units 1,20,000 1,20,000 Completion 100% 40% B 120000 48000 Total units 750000 678000

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