Question
I think we goofed when we hired that new assistant controller, said Ruth Scarpino, president of Provost Industries. Just look at this report that he
I think we goofed when we hired that new assistant controller, said Ruth Scarpino, president of Provost Industries. Just look at this report that he prepared for last month for the Finishing Department. I cant understand it. |
Finishing Department costs: | |||
Work in process inventory on April 1 - 14,000 units; materials 100% complete; conversion 87.5% complete | $ | 31,400 | * |
Costs transferred in during the month from the preceding department, 107,000 units | 133,750 | ||
Materials cost added during the month | 51,600 | ||
Conversion costs incurred during the month | 153,840 | ||
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Total departmental costs | $ | 370,590 | |
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Finishing Department costs assigned to: | |||
Units completed and transferred to finished goods, 100,000 units at $3.7059 per unit | $ | 370,590 | |
Work in process inventory on April 30 - 21,000 units; materials 0% complete; conversion 40% complete | 0 | ||
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Total departmental costs assigned | $ | 370,590 | |
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*Consists of cost transferred in, $9,300; materials cost, $4,100; and conversion cost, $18,000. |
Hes struggling to learn our system, replied Frank Harrop, the operations manager. The problem is that hes been away from process costing for a long time, and its coming back slowly. | |||||||||
Its not just the format of his report that Im concerned about. Look at that $3.7059 unit cost that hes come up with for April. Doesnt that seem high to you? said Ms. Scarpino. | |||||||||
Yes, it does seem high; but on the other hand, I know we had an increase in materials prices during April, and that may be the explanation, replied Mr. Harrop. Ill get someone else to redo this report and then we may be able to see whats going on. | |||||||||
Provost Industries manufactures a ceramic product that goes through two processing departmentsMolding and Finishing. Assume that the company uses the FIFO method in its process costing system.
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2. | As stated in the case, the company experienced an increase in materials prices during April. Would the effects of this price increase tend to show up more under the weighted-average method or under the FIFO method? |
FIFO Method
Weighted Average Method
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