You are a CPA auditingStarkCompany's financial statements.Your firm is trying to verify the accuracy of the ending WIP and Finished Goods inventories prior to closing the books for the year.You have been asked to assist in this verification.The company uses Process Costing to determine inventory costs.

The balances in the Work-In Process (WIP) and Finished Goods Inventories (units and dollars) are as follows:

AccountBeginning UnitsBeginning $End UnitsEnd $Work-In Process200,000$704,000300,000$903,000Finished Goods0$0200,000$954,000

With respect to WIP, Materials are complete when used.In the beginning WIP, Materials were 100% complete.Conversion costs were 80% complete.Manufacturing Overhead (MOH) is applied at 60% of Labor Costs.At the beginning of the year, WIP Materials totaled $200,000 and Labor totaled $315,000 (these amounts are included in Beginning WIP).

During the period, 1 million units were started into production and 900,000 units were transferred to Finished Goods.During the period, $1,300,000 of Materials cost and $1,995,000 of Labor Costs were incurred.

In Ending WIP, the units are 100% complete as to Materials and 50% complete as to Conversion costs.

The beginning balances are based on prior year's audited financial statements and may be relied upon.The information regarding units started and transferred during the period, and their costs, may be relied upon.The end units (including % of completion) is based on a year-end inventory count and may be relied upon.However, management is not certain whether the ending cost amounts ($) are correct.

Requirements:You will be analyzing this information using both FIFO and Weighted Average Cost.

1. Determine the amount of Manufacturing Overhead in Beginning WIP (prove it)
2. Show the flow of units in WIP for the period (reconciling beginning and ending units)
3. Show the total costs to be accounted for (ultimately ending up in Ending WIP and Cost of Goods Manufactured)
4. Using FIFO:

• Determine Equivalent Units for Materials, Labor and Overhead
• Determine Equivalent Cost per Unit of Materials, Labor and Overhead
• Assign costs to Ending WIP
• Assign costs to units transferred to Finished Goods (Cost of Goods Manufactured)
• Prove that all manufacturing costs are accounted for
• Compute the ending balance in Finished Goods
• Compare the ending balances in WIP and Finished Goods that you have computed to those provided by Management.If necessary, provide the journal entry correcting the ending balances to your computations."Plug" the difference to Cost of Goods Sold

1. UsingWeighted Average:

• Determine Equivalent Units for Materials, Labor and Overhead
• Determine Equivalent Cost per Unit of Materials, Labor and Overhead
• Assign costs to Ending WIP
• Assign costs to units transferred to Finished Goods (Cost of Goods Manufactured)
• Prove that all manufacturing costs are accounted for
• Compute the ending balance in Finished Goods
• Compare the ending balances in WIP and Finished Goods that you have computed to those provided by Management.If necessary, provide the journal entry correcting the ending balances to your computations."Plug" the difference to Cost of Goods Sold

1. Reconcile Weighted Average Equivalent Units to FIFO Equivalent Units for Materials, Labor and Overhead