Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Analyze the physical flow for In the Doghouse In the Doghouse produces wooden doghouses with shingled roofs. At the beginning of June, there were 300

Analyze the physical flow for In the Doghouse In the Doghouse produces wooden doghouses with shingled roofs. At the beginning of June, there were 300 units in BWIP with costs of $14,304. During the month, the company completed work on the BWIP and began production on 1,200 units. In the Doghouse incurred $96,000 in manufacturing costs during June. At the end of the month, 100 units of those started during the month were in EWIP. In the table to the below, account for the units for June.

Physical flow for June
Completed from BWIP
Started and completed
Total units completed
EWIP
Total units accounted for

Step 2: Calculate the Equivalent Units for the Period The units in BWIP and EWIP are not 100% complete. This step allows BWIP and EWIP to be stated in terms of completed units, which are called equivalent units. This step must be completed before the cost per unit can be calculated.

Under the weighted average method, BWIP is considered to be started and completed during the period when calculating equivalent units. Therefore, BWIP units are included at 100%. Under the FIFO method, the BWIP units are measured by the percentage of work required to complete those units. Therefore, the percentage of work that needs to be done to complete the units must be multiplied by the number of units in BWIP.

APPLY THE CONCEPTS: Step 2 Using the data from above, calculate the Equivalent Units for June. (Note: In the Doghouses production manager has estimated that the units in BWIP were 80% complete at the beginning of June. The BWIP units were completed during the month. That is, 20% of the work to complete the units was done in the current period (100% 80% = 20%). The manager has also estimated that EWIP was 40% complete at the end of month. Refer to the analysis of the physical flow.)

Equivalent units for June Weighted average FIFO
BWIP
Units started and completed
EWIP
June equivalent units

Step 3: Compute the Cost per Equivalent Unit

The calculation for cost per equivalent unit is a simple calculation:

Manufacturing Costs
Equivalent Units

Under the weighted average method, the numerator is the sum of the manufacturing costs in BWIP and the manufacturing costs for the period. Under the FIFO method, the beginning inventory costs are excluded from this calculation. The numerator is the manufacturing costs for the current period only. Equivalent units for the period were computed in step 2.

APPLY THE CONCEPTS: Step 3 Recall that the BWIP had costs of $14,304. During June, In the Doghouse incurred $96,000 in manufacturing costs. Complete the formula and cost per equivalent unit for the weighted average method and for the FIFO method to the below. If required, round the cost per equivalent unit amount to the nearest cent.

Compute the Weighted Average Cost per Equivalent Unit for June

Weighted Average Cost per Equivalent Unit = $
= $

Compute the FIFO Cost per Equivalent Unit for June

FIFO Cost per Equivalent Unit =
= $

Step 4: Valuation of Inventories In this step, the cost of the units transferred out of the current process to Finished Goods is computed by using the information calculated in steps 2 and 3.

Recall that the weighted average method assumes that BWIP units are started and completed during the current period. Because of this assumption, BWIP costs were included in the cost per equivalent unit. Therefore, costs transferred out (to Finished Goods) are calculated by multiplying the units started and completed (step 2) times the weighted average cost per equivalent unit (step 3).

The FIFO method requires the BWIP equivalent units to be added to the units started and completed to determine the units transferred out (step 2). These units are multiplied times the FIFO cost per equivalent unit (step 3). This amount is added to the costs in BWIP to determine the costs transferred out (to Finished Goods). If required, round the cost per equivalent unit amounts to the nearest cent.

APPLY THE CONCEPTS: Step 4

Valuation of Inventories for June

Inventory Valuation for June Weighted average FIFO
Finished Goods:
BWIP equivalent units
Started and completed
Units transferred out
x Cost per equivalent unit $ $
$ $
+ BWIP costs
Costs transferred out $ $
EWIP:
EWIP equivalent units
x Cost per equivalent unit $ $
Costs in EWIP $ $

Step 5: Cost Reconciliation The purpose of cost reconciliation is to confirm that costs have been fully allocated to inventories. The total costs to account for are the sum of the costs in BWIP and the manufacturing costs for the period. This sum is reconciled by showing that it has been allocated to Finished Goods (units transferred out) and EWIP.

APPLY THE CONCEPTS: Step 5 Cost Reconciliation for June

Weighted average FIFO
Costs to account for:
Costs in BWIP $ $
Manufacturing costs during June
Total costs to account for $ $
Cost reconciliation:
Costs transferred out $ $
Costs in EWIP
Total costs accounted for $ $

Comment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Product Costing Concepts And Applications

Authors: Ralph S. Polimeni

3rd Edition

0072390840, 978-0072390841

More Books

Students also viewed these Accounting questions

Question

What do you know of my (the interviewers) research program?

Answered: 1 week ago