Question 3 has two parts, Parts A and B. Both are compulsory. Part A Weighted Average Method Chomp Pet Foods Ltds division A produces canned dog food in standard sizes. Set out below is information for the month of January: Work-in-process inventory, 1 January 4,000 units Direct materials: 100% complete $6,000 Conversion: 50% complete $12,000 Units started during January 8,000 units Units completed and transferred out during January 8,000 units Work-in-process inventory, 31 January Direct materials: 100% complete Conversion costs: 50% complete Costs incurred during January Direct materials $12,000 Conversion $128,000 Required: Show ALL your workings. Applying the weighted average method complete the following: (i) Calculate equivalent units of direct materials and conversion for the month of January. (ii) Calculate direct material cost and conversion cost per equivalent unit for the month of January. (iii) Prepare an analysis of total costs showing the cost of goods completed and transferred out during January and cost of WIP inventory on 31 January.

Part B FIFO Method & Ethics Chomp Pet Foods Ltds production manager Jack Jones has been under pressure from senior management to improve divisional profitability (which is also incidentally linked to his performance bonus). Jack is required to attend an upcoming meeting to explain the average performance. He approaches the management accountant Rachel Murray with the following request: Rachel, I am under pressure to lift divisional performance. This is going to happen as the summer months approach, but I need a little time. I want you to do me a favour. Could you prepare the January monthlies using FIFO method instead of the weighted average method currently used? I know that it is just as acceptable a method, and the lift in profit it shows will give me the time I need to carry over to the profitable summer season. Required: Show ALL your workings. Using the data from Part A, complete the following by applying the FIFO method: (i) Calculate equivalent units of direct materials and conversion for the month of January. (ii) Calculate direct material cost and conversion cost per equivalent unit for the month of January. (iii) Prepare an analysis of total costs showing the cost of goods completed and transferred out during January and cost of WIP inventory on 31 January, as per Exhibit 5.9 (p.195) of the textbook. (iv) Clearly explain the difference in the dollar value of the cost of goods completed and transferred out obtained above using FIFO with the dollar value calculated using the weighted average in Part A (iii). (v) If you were Rachel, would you agree to Jacks request? Clearly explain your reasons for either agreeing or disagreeing.