Question
Tiny Packs produces leather backpack purses that it markets to working professionals looking for an alternative to a briefcase or standard purse. Tiny Packs' products
Tiny Packs produces leather backpack purses that it markets to working professionals looking for an alternative to a briefcase or standard purse. Tiny Packs' products originate in the Cutting department, and they are then put together in the Assembly department. At the conclusion of the assembly process, each backpack is subject to a short inspection before being packaged for sale. The following unit information was compiled to reflect activity in the Assembly department for the most recent month of August:
Physical Units
Transferred-In (TI)
Direct
Materials (DM)
Conversion Costs (CC)
Beginning Work-in- Progress (WIP) Inventory1980
100.00%
100.00%
72.00%
Transferred-In Units5496 Units completed6517 Ending WIP Inventory959100%100%47%The costs associated with the aforementioned units for the month of August is as follows:
Transferred-In
Direct Materials
Conversion Costs
Beginning WIP Inventory
$2,342
$688
$802
Costs added during the period
89449813110Tiny Packs has not yet made a final decision regarding the use of First-In, First-Out (FIFO) or Weighted-Average. They sell each backpack for $98.50 per backpack. (Remember do not round calculations.)
a. What is the cost of units transfered out and cost of Ending WIP using the FIFO method? (5 pts)
b. What is the cost of units transferred out and the cost of ending WIP using the Weighted-Average method? (5 pts)
c. What is the gross margin percentage under both FIFO and Weighted-Average? Which method should Tiny consider implementing? (4 pts)
d. Suppose Tiny decides to implement Weighted-Average because it results in a higher gross margin. Evaluate that decision using the IMA's code of professional practice. (10 pts)
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