Gannett Handcraft is a manufacturer of picture frames for large retailers. Every
ID: 2449293 • Letter: G
Question
Gannett 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 systenm at Gannett 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. Gannett uses the FIFO method of process costing. Consider the following data for the assembly department i April 2012 )(Click the icon to view the data.) (5) (Click the icon to view the total costs assigned under the weighted-average method.) Requirement 1. Summarize total assembly department costs for April 2012, and assign total costs to units completed (and transferred out) and to units in ending work in process. Explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the assembly department under the weighted-average method and the FIFO method Begin by calculating the physical units and equivalent units. (Enter an amount in each input cell.) Equivalent Units Physical Units Direct Csin ons Materials Costs Work in process, beginning Transferred-in during current period To account for Completed and transferred out during current period 120 485 From beginning work in process 120 Started and completed Work in process, ending Accounted for Work done in current period only 160Explanation / Answer
The FIFO ending inventory is higher than the weighted-average ending inventory .
This is because FIFO assumes that all the lower-cost prior-period units in work in process are the
first to be completed and transferred out while ending work in process consists of only the
higher-cost current-period units. The weighted-average method, however, smoothes out cost per
equivalent unit by assuming that more of the higher-cost units are completed and transferred out,
while some of the lower-cost units in beginning work in process are placed in ending work in
process. Hence, in this case, the weighted-average method results in a higher cost of units
completed and transferred out and a lower ending work-in-process inventory relative to the FIFO
method.
Physical Units Direct Material Conversion Costs WIP Beginning 120 Transfered In During Current Period 485 To Account For 605 Completed and Tranfered From Beginning WIP 120 0 72 Started And Completed(485-160) 325 325 325 WIP ending 160 160 8 Accounted For 605 Work Done In Current period 485 405Related Questions
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