WA-AND FIFO) Starbing Paints makes quality paint sold at premium prices in one production department. Production begins
Question:
WA-AND FIFO) Starbing Paints makes quality paint sold at premium prices in one production department. Production begins with the blending of various chemicals, which are added at the beginning of the process, and ends with the canning of the paint. Canning occurs when the mixture reaches the 90 percent stage of completion. The gallon cans are then transferred to the Shipping Department for crating and shipment. Labor and overhead are added continuously throughout the process. Factory overhead is applied at the rate of $3 per direct labor hour.
Prior to May, when a change in the process was implemented, work in process inventories were insignificant. The change in process enables more production but results in large amounts of work in process. The company has always used the weighted average method to determine equivalent pro¬ duction and unit costs. Now production management is considering chang¬ ing from the weighted average method to the first-in, first-out method.
The following data relate to actual production during May:
a. Prepare a cost of production report for each cost element for May using the weighted average method.
b. Prepare a cost of production report for each cost element for May using the FIFO method.
c. Discuss the advantages and disadvantages of using the weighted average method versus the FIFO method, and explain under what circumstances each method should be used.
(CAM adapted)LO1.
Step by Step Answer:
Cost Accounting Foundations And Evolutions
ISBN: 9780324235012
6th Edition
Authors: Michael R. Kinney, Jenice Prather-Kinsey, Cecily A. Raiborn