NEED REQUIREMENT #2
Porter Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at Porter has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added when the assembly department process is 10% complete. Conversion costs are added evenly during the assembly department's process. Porter uses the FIFO method of process costing. Consider the following data for the assembly department in April 2017: Data table Conversion Costs $278 Physical Units Direct (Frames) Materials Beginning work in process, (April 1) 80 $1,060 Started during April 2017 500 Completed during April 2017 460 Ending work in process, (April 30) 120 Total costs added during April 2017 $17,500 Degree of completion: direct materials, 100%; conversion costs, 40%. Degree of completion: direct materials, 100%; conversion costs, 25%. b $10,992 a b Reference Total Direct Conversion Production Costs Materials Costs Completed and transferred out $ 25,300 $ 4,530 14,720 $ 3,840 10,580 690 Work in process, ending $ 29,830 $ 18,560 $ 11,270 Total costs accounted for Requirement 1. Summarize total assembly department costs for April 2017, and assign total costs to units completed (and transferred out) and to units in ending work in process. Begin by calculating the physical units and equivalent units. (For amounts with a 0 balance, make sure to enter "0" in the appropriate cell.) Equivalent Units Direct Conversion Physical Units (tons) Materials Costs Work in process, beginning 80 500 Transferred-in during current period 580 To account for Completed and transferred out during current period: From beginning work in process Started and completed 80 0 48 380 380 380 120 120 30 Work in process, ending 580 Accounted for 500 458 Equivalent units of work done in current period Now summarize the total costs to account for. Total Direct Conversion Production Costs Materials Costs Work in process, beginning $ 1,338 $ 1,060 $ 278 Costs added in current period 28,492 17,500 10,992 29,830 $ 18,560 $ 11,270 Total costs to account for Next calculate cost per equivalent unit for direct materials and conversion costs. Direct Conversion Materials Costs Costs added in current period 17,500 $ 10,992 500 Divide by Equivalent units of work done in current period 458 $ 35 $ 24 Cost per equivalent unit 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. (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: Work in process, beginning 1,338 $ 1,060 $ 278 Costs added to beginning WIP in current period 1,152 0 1,152 2,490 Total from beginning inventory Started and completed 22,420 13,300 9,120 Total costs of units completed and transferred out 24,910 Work in process, ending 4,920 4,200 720 29,830 $ 18,560 $ 11,270 Total costs accounted for 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 Porter'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 than the weighted-average ending inventory. This is because FIFO assumes that all the higher-cost current-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
