Assign total costs to units completed (and transferred out) and to units in ending work in process. Begin by calculating the total from beginning inventory, and then calculate the total costs accounted for. (For amounts with a 0 balance, make sure to enter "0" in the appropriate cell.)

	Total	Direct	Conversion
	Production Costs	Materials	Costs
Completed and transferred out:
Total from beginning inventory

Part 5

Total costs of units completed and transferred out
Total costs accounted for

Part 6

Requirement 2. 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. Should

Pelham's

managers choose the weighted-average method or the FIFO method? Explain briefly.

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.

The FIFO ending work in process inventory is

higher

lower

than the weighted-average ending inventory. This is because FIFO assumes that all the

higher-cost current-period

higher-cost prior-period

lower-cost current-period

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.

higher-cost prior-period units.

lower-cost current-period units.

lower-cost prior-period units.

Part 7

The weighted-average method

creates a greatly higher cost per equivalent unit

smooths out cost per equivalent unit

by assuming that

more of the higher-cost units

only a few of the higher-cost units

are completed and transferred out, while

none of the lower-cost units

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

lower

cost of units completed and transferred out and a

higher

lower

ending work-in-process inventory relative to FIFO.

Part 8

Should

Pelham's

managers choose the weighted-average method or the FIFO method? Explain briefly.

Begin by completing the table below that summarizes the costs assigned to units completed and those still in process under the weighted-average and FIFO process-costing methods.

	Weighted-average	FIFO	Difference
Cost of units completed and transferred out
Work in process, ending
Total costs accounted for

Part 9

Given the relatively small difference in the income numbers generated by the two methods,

Pelham's

managers would likely

be indifferent between the two methods.

choose the FIFO method.

choose the weighted-average method.

If the differences are expected to be larger in future years, the managers should choose the method that will

decrease

increase

Pelham's

operating income and taxes. They may have an incentive, however, to use the alternate method in order to obtain higher levels of income-based compensation or if there are debt covenants that would be violated by showing

higher

lower

income. One advantage of the FIFO method worth considering is that it provides better information for managing the business because it

separates the costs of the current period from costs incurred in previous periods.

decreases the variability of the cost per equivalent unit.

(Click the icon to view the assembly department data.) Click the icon to view the total costs assigned under the weighted-average method.) Total costs assigned Requirement 1. Summarize the total assembly department costs for April, and assign total costs to units completed (and transferred out) and to units in ending work in progress. Begin by calculating the physical units and equivalent units. (For amounts with a 0 balance, make sure to enter "0" in the appropriate cell.) Canaralantllanite Assembly Department Data Required 1. Summarize the total assembly department costs for April, and assign total costs to units completed (and transferred out) and to units in ending work in 2. 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. Should Pelham's managers choose the weighted-average method or the FIFO method? Explain briefly