Fairfax Company uses weighted-average process costing to account for its product
ID: 2375029 • Letter: F
Question
Fairfax Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During September, the company transferred 735,000 units of product to finished goods. At the end of September, the goods in process inventory consists of 207,000 units that are 90% complete with respect to labor. Beginning inventory had $244,920 of direct materials and $69,098 of direct labor cost. The direct labor cost added in September is $1,312,852, and the direct materials cost added is $1,639,080.
Compute both direct labor cost and direct materials cost assigned to units completed and transferred out
Compute both direct labor cost and direct materials cost assigned to ending goods in process inventory
Fairfax Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During September, the company transferred 735,000 units of product to finished goods. At the end of September, the goods in process inventory consists of 207,000 units that are 90% complete with respect to labor. Beginning inventory had $244,920 of direct materials and $69,098 of direct labor cost. The direct labor cost added in September is $1,312,852, and the direct materials cost added is $1,639,080.
Explanation / Answer
Total Direct Material = $1,990,000.00
Total Direct Labor = $3,339,450.00
Total Direct Resources (DM+DL) = $5,329,450.00
Since, Direct Material is added at the beginning of the process $1,990,000.00 was dispersed between 995,000 units (205,000+790,000)
Since, there is still 20% of DL left to complete 205,000 items, which equals $667,890.00 worth of labor cost, cost per DL hr (or any relevant unit of measure) is $3.26.
Cost per DM is $5.36 (total direct material divided by 995,000)
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