Process costing (14 marks)

Thompsons Tea makes tea kettles. It uses a process costing system to cost its products. The company makes kettles in three departments: Assembly, Coating, and Packaging. In the Assembly department the direct materials along with conversion costs are added evenly throughout the process.

The cost accountant is completing the production report for April. At the beginning of the month 3,500 kettles had 60% of the work completed in March. 19,000 kettles were started in April and 2,500 remain in ending inventory at the end of April. This ending inventory is 20% complete. The rest were completed and transferred to the Coating Department in April.

The cost accountant must determine how much of the following costs should be transferred to the Coating Department and how much remains in ending inventory.

Cost of beginning work-in-process:

• Direct materials $ 4,830
• Conversion costs $ 2,625

Cost added during April:

• Direct material $42,320
• Conversion costs $23,000

Required:

1. Using the first-in, first-out (FIFO) method determines the assignment of the cost of tea kettles transferred-out to the Coating and ending inventory for the Assembly Department for April. Use the form on the last page of this exam. (10 marks)
2. Thompsons Tea has used First in First out costs for the last 15 years. The controller wants to know if it is beneficial to continue using this method instead of the weighted average method. Provide the controller with your recommendation. Include appropriate calculations to back up your recommendation. (4 marks)