Hoffman

Company manufactures car seats in its

Boise

plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department.

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(Click the icon to view information about

Hoffman

Company's process-costing system.)

Data for the assembly department for October

2017

are as follows:

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(Click the icon to view the assembly department data.)

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The process-costing system at

Hoffman

Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing.

Hoffman

Company uses the FIFO method of process costing.

	Physical Units	Direct	Conversion
	(Car Seats)	Materials	Costs

Work in process, October 1a	4,000	$1,248,000	$241,650
Started during October 2017	22,500
Completed during October 2017	26,000
Work in process, October 31b	500
Total costs added during October 2017		$4,635,000	$2,575,125

aDegree

of completion: direct materials, ?%; conversion costs,

45%.

bDegree

of completion: direct materials, ?%; conversion costs,

65%.

PrintDone

Requirement 1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule. (For amounts with a 0 balance, make sure to enter "0" in the appropriate cell.)

		Equivalent Units
	Physical	Direct	Conversion
Flow of Production	Units	Materials	Costs
Work in process beginning	4000
Started during current period	22500
To account for	26500
Completed and transferred out during current period:
From beginning work in process
Started and completed	26000	26000	26000
Work in process, ending	500	500	325
Accounted for
Equivalent units of work done in current period only

Requirement 2. For each cost category, summarize total assembly department costs for October

2017

and calculate the cost per equivalent unit.

Begin by summarizing the total costs to account for.

		Total	Direct	Conversion
		Production Costs	Materials	Costs
Total costs to account for

Next calculate cost per equivalent unit for direct materials and conversion costs.

		Direct	Conversion
		Materials	Costs
Divide by
Cost per equivalent unit for work done in current period

Requirement 3. 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, then calculate the total costs accounted for. (Abbreviation used; WIP = work in process. 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

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

Requirement 4. Explain any difference between the cost per equivalent unit in the assembly department under the weighted-average method and the FIFO method.

The cost per equivalent unit

differs

is the same

between the two methods because each method uses

different

the same

costs as the numerator of the calculation. The FIFO method uses

costs from the beginning work-in-process as well as costs added during the current period

only the beginning work-in-process costs

only the costs added during the current period

and the weighted-average method uses

costs from the beginning work-in-process as well as costs added during the current period.

only the beginning work-in-process costs.

only the costs added during the current period.

Both methods use

different

the same

equivalent units in the denominator.

Requirement 5. Should

Hoffman'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

Hoffman's

managers should consider the

FIFO

weighted-average

method because even though it shows

lower

higher

operating income and

lower

higher

cost of goods sold, it

lower

higher

taxes. Managers may have an incentive, however, to use the

FIFO

weighted-average

method and show higher income if the managers' compensation increases with

lower

higher

operating income or if there are debt covenants that would be violated by showing

lower

higher

income. Another advantage of the FIFO method is that it provides better information for managing the business because it keeps

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

smootsh the cost per equivalent unit.

(Click the icon to view the weighted-average cost per equivalent unit data and total costs accounted for.)Read the

require