Question
Baxley Products manufactures office furniture by using an assembly-line process. All direct materials are introduced at the start of the process, and conversion cost is
Baxley Products manufactures office furniture by using an assembly-line process. All direct materials are introduced at the start of the process, and conversion cost is incurred evenly throughout manufacturing.
It uses absorption costing for financial performance evaluation and applies overhead based on machine-hours. Data concerning manufacturing overhead (MOH) incurred machine hours (MH) used for the last seven years follow. Currently, Baxley is using weighted-average method of process costing.
Year | Plant-wide MOH$ | Machine Hours Used |
2011 | $245,800 | 16,380 |
2012 | $246,250 | 16,250 |
2013 | $354,820 | 16,320 |
2014 | $353,800 | 27,200 |
2015 | $302,700 | 28,200 |
2016 | $276,400 | 22,400 |
2017 | $254,200 | 19,600 |
It has a practical capacity of 20,000 MH per year. Its normal capacity is estimated to be 18,000 MH.
An examination of the company's Work-in-Process account for August revealed the following selected information:
August 1 balance: 600 units, 40% complete; cost, $44,600*
Production started: 1,800 units
Direct materials used during August: $90,000
MH used during August: 2,000 (within Baxleys production relevant range)
August direct labor cost: $25,066.67
Production completed: 1,400 units
*Supplementary records disclosed direct material cost of $30,000 and conversion cost of $14,600.
Conversations with manufacturing personnel revealed that the ending work in process was 80% complete.
Required:
A. Determine the number of units in the August 31 work-in-process inventory.
B. Calculate the cost of goods completed during August, and prepare the appropriate journal entry to record completed production.
C. Determine the cost of the August 31 work-in-process inventory.
D. What the factors Baxley needs to consider for switching to FIFO process costing?
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