4. The assembly division of Fenton Watches, Inc., uses the weighted-average meth

Question

4. The assembly division of Fenton Watches, Inc., uses the weighted-average method of process costing. Consider the following data for the month of May 2014: Physical Units (Watches) 80 Direct Materials Conversion Costs $91,040 Beginning work in process (May 1)* Started in May 2014 Completed during May 2014 Ending work in process (May 31)* Total costs added during May 2014 * Degree of completion: direct materials, 90%; conversion costs, 40% **Degree of completion: direct materials, 60%; conversion , 30% S493,360 500 460 120 S3,220,00 $1,392,000 a. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule. (Use Weighted-average method.) b. Suppose the assembly division of Fenton Watches, Inc uses the FIFO method of process costing instead of weighted average method. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule

Explanation / Answer

Part a --- Equivalent Units – Weighted Average Method

Weighted Average (Average Cost) Method

Physical Units Count

Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.

Cost Accounted for:

- The cost of opening work-in-progress and cost of the current period are aggregated and the aggregate cost is divided by output in terms of completed equivalent units.

- The units of Beginning Inventory of WIP and their cost are taken in full under this method

Ending Inventory

The Ending Inventory of WIP is valued at total cost i.e. Cost added during the month/period and Cost of Beginning WIP.

Physical Units

% material

Material - EUP

% Conversion

Conversion - EUP

Completed Units during the period

460

100%

460

100%

460

Ending Work In Process

120

60%

72

30%

36

Total

580

532

496

Under weighted Average Method

Equivalent Units of Production for Material = 532 Units

Equivalent Units of Production for Conversion = 496 Units

Part b – Equivalent Units using FIFO Method

FIFO Method in Process Costing

Physical Units Count

In FIFO method, the unit of beginning inventory is completed first and then Units received during the period is completed.

Equivalent units of Material

In FIFO method,

- First we calculate the cost per equivalent units of material and conversion by using the cost incurred during the current period i.e. current period cost and divide by equivalent units of production.

- While calculating the equivalent cost per unit of production beginning WIP cost is ignored.

Cost Accounted for:

Cost of Beginning Units is the sum of following

(i) Current Period Cost (i.e. the cost of equivalent production units part of beginning inventory completed during the period and

(ii) the cost of beginning inventory

The part of beginning inventory completed during the period is calculated by multiplying the cost of equivalent units with the completed equivalent part of beginning units during the current period

Ending Inventory

The Ending Inventory is valued at current period cost i.e. the cost added during the current period/month.

Physical Units

% material

Material - EUP

% Conversion

Conversion - EUP

Partial Completed Units from beginning work in process

80

10%

8

60%

48

Started and completed Units during the period

380

100%

380

100%

380

Total Completed Units during the period

460

Ending Work In Process

120

60%

72

30%

36

Total

580

460

464

Under First in First Out Method

Equivalent Units of Production for Material = 460 Units

Equivalent Units of Production for Conversion = 464 Units

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Physical Units

% material

Material - EUP

% Conversion

Conversion - EUP

Completed Units during the period

460

100%

460

100%

460

Ending Work In Process

120

60%

72

30%

36

Total

580

532

496

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.