LogicCoLogicCo

is a fast-growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value.

LogicCoLogicCo

uses the FIFO method of process costing. Summary data and weighted-average data for

SeptemberSeptember

20172017

are as follows:

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.

Requirement 1. For each cost category, compute equivalent units. Show physical units in the first column of your schedule.

Enter the physical units in first, then calculate the equivalent units. (Complete all answer boxes. Enter a "0" for applicable zero amounts.)

	Physical
Flow of Production	Units
Work in process beginning
Started during current period
To account for
Completed and transferred out during current period
From beginning work in process
Started and completed
Normal spoilage
Abnormal spoilage
Work in process, ending
Accounted for
Equivalent units of work done in current period

Equivalent Units
Direct	Conversion
Materials	Costs

Requirement 2. Summarize total costs to account for; calculate the cost per equivalent unit for each cost category; and assign total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process.

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 each cost category. (Enter your answers to the nearest cent.)

		Direct	Conversion
		Materials	Costs
Divide by:
Cost per equivalent unit for work done to date

Finally assign total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. (Complete all answer boxes. Round your answers to the nearest whole dollar. Note that the total costs accounted for may not equal the total costs to account for due to rounding.)

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

Total costs of units completed and transferred out

Total costs accounted for

Requirement 3. Should

LogicCoLogicCo's

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

The FIFO ending inventory is			than the weighted-average ending inventory by $			. The FIFO
method also assigns $			in costs to spoilage. As a result, the FIFO method results in a relatively
cost of units completed and transferred out and a				ending work-in-process inventory.

LogicCoLogicCo's

managers should consider the

FIFO method

weighted-average method

because it leads to a higher cost of goods completed and transferred (and sold), thereby lowering taxes. The managers may have an incentive, however, to use the

FIFO method

weighted-average method

and show a higher level of current income if their compensation increases with higher operating income or if there are debt covenants that would be violated by showing lower income.

LogicCoLogicCo's

managers may also consider an advantage of the

FIFO method,

weighted-average method,

which 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.

	Physical Units	Direct	Conversion
	(Computer Chips)	Materials	Costs

Work in process, beginning inventory left parenthesis September 1 right parenthesis(September 1)	900900	$ 125 comma 766$125,766	$ 10 comma 368$10,368
Degree of completion of beginning work in process		100%	30%
Started during SeptemberSeptember	2 comma 7542,754
Good units completed and transferred out during SeptemberSeptember	2 comma 5002,500
Work in process, ending inventory (SeptemberSeptember 30)	490490
Degree of completion of ending work in process		100100%	1010%
Total costs added during SeptemberSeptember		$ 619 comma 650$619,650	$ 253 comma 098$253,098
Normal spoilage as a percentage of good units	15%
Degree of completion of normal spoilage		100%	100%
Degree of completion of abnormal spoilage		100%	100%

Total Production

Direct

Conversion

Costs

Materials

Costs

Cost per equivalent unit for work done to date

$204.00

$82.00

Cost of units completed and transferred out

$822,250

$586,500

$235,750

Abnormal spoilage

82,654

58,956

23,698

Work in process, ending

103,978

99,960

4,018

Total costs accounted for

$1,008,882

$745,416

$263,466