PLEASE SHOW WORK! The Morgan Models company manufacturers replica plastic airpla
ID: 2465345 • Letter: P
Question
PLEASE SHOW WORK!
The Morgan Models company manufacturers replica plastic airplane and motorized vehicle models. During October, the firm's Assembly Department started production of 60,000 models. During the month, the firm completed 66,000 models, and transferred them to the Finishing Department. The firm ended the month with 22,000 models in ending inventory. There were 28,000 models in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Morgan. Beginning work in process was 25% complete as to conversion costs, while ending work in process was 50% complete as to conversion costs.
Beginning inventory:
Direct materials costs $39,200
Conversion costs $30,800
Manufacturing costs added during the accounting period:
Direct materials costs $90,000
Conversion costs $280,000
A) How many of the units that were started during October were completed during October?
B) What were the equivalent units for conversion costs during October?
C) What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of October?
Explanation / Answer
Solution:
A) How many of the units that were started during October were completed during October?
Since company is following FIFO method, then the beginning inventory of October completed first and then introduced units during October month. Here is the statement of units completed and introduced during the month according to FIFO method:
Input
Units
Output
Units
Beginning Inventory
28,000
Completed and Transferred to Finishing Department
Units introduced during the month
60,000
-- Beginning Inventory
28,000
-- Introduced during the month
38,000
66,000
Ending Inventory
22,000
88,000
88,000
The number of units that were started during October were completed during October = 38,000 Units
B) What were the equivalent units for conversion costs during October?
Output
Units
For Conversion Cost
Completion %
Equivalent Units
Completed and Transferred to Finishing Department
-- Beginning Inventory
28,000
75%
21,000
-- Introduced during the month
38,000
100%
38,000
66,000
Ending Inventory
22,000
50%
11,000
88,000
70,000
Equivalent Units for Conversion Costs during October = 70,000 Units
C) What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of October?
Under FIFO Method, proportionate cost to complete the opening work-in-progress and that to process the completely processed units during the period are derived separately.
The cost of opening work-in-progress is added to the proportionate cost incurred on completing the same to get the complete cost of such units. Complete cost of such units plus cost of units completely processed constitute the total cost of units transferred.
- In this method the closing stock of Work in progress is valued at current cost.
Calculation of Cost per Equivalent units for Direct Material and Conversion Cost for the current period
Direct Material
Conversion Cost
Cost of the Process (for the period)
$90,000
$280,000
Equivalent Completed Units
-- For Direct Material (38,000 + 22,000)
60,000
$47,000
-- For Conversion Cost (38,000 + 9,000)
Cost Per Equivalent Unit
$1.50
$5.95745 or $5.96
Ending Inventory
100% Complete with respect to Direct Material
50% Complete with respect to Conversion Cost
Valuation of Ending Inventory
Direct Material (22,000 Units x $1.50) = $33,000
Conversion Cost (9,000 Units x $5.96 = $53,640
Total Value of Ending Inventory = $33,000 + $53,640 = $86,640
Input
Units
Output
Units
Beginning Inventory
28,000
Completed and Transferred to Finishing Department
Units introduced during the month
60,000
-- Beginning Inventory
28,000
-- Introduced during the month
38,000
66,000
Ending Inventory
22,000
88,000
88,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.