Chapter 3

A company using the FIFO Method had a beginning WIP Inventory of 10,000 units and completed 75,000 units. They also had 5,000 units in ending WIP inventory. The number of units started and completed equals what?

Units completed of 75,000 - Beginning WIP inventory 10,000 = 65 Units started and completed.

Process Operations

- Used for production of identical, low-cost items. - Massed produced in automated continuous production process. - Costs cannot be directly traced to each unit of product. - Series of repetitive processes. - Final process produces finished goods ready for sale to customers.

Weighted Average Cost Flow System Steps

1. Determine Physical Flow of Units. 2. Compute Equivalent Units of Production. 3. Compute Cost per Equivalent Units of Production. 4. Assign and Reconcile Costs.

Weighted Average - Step 4

Cost of units completed and transferred out + Cost in ending work in process inventory = Total cost accounted for.

The beginning WIP inventory consists of $3,000 direct materials, $10,000 of direct labor, and $10,000 of factory overhead. Costs incurred during the period were $15,000 of direct materials and $100,000 of conversion costs. The EUP's were $9,000 of direct materials and $6,000 of conversion costs. What are the costs per equivalent units of production?

DM: Beginning WIP $3,000 + Costs incurred $15,000 / EUP $9,000 = $2.00 per EUP. Conversion: DL $10,000 + OH $10,000 + Costs incurred $100,000 /. EUP $6,000 = $20.00 per EUP.

Weighted Average - Step 2

Number of units completed and transferred out + number of equivalent units in ending work in process inventory = Equivalent units of production.

Equivalent Units of Production (EUP)

Number of units that could have been started and completed during the period given the costs incurred during the period.

EUP for Materials and Conversion Costs

Physical number of units x % Complete

Equivalent Units of Production - FIFO

To complete beginning WIP + Units started and completed + units in ending inventory = Total equivalent units of production.

The beginning WIP, 70% complete, consisted of 10,000 units. Units started during the year totaled 150,000 units. A total of 140,000 units were completed during the year. The ending WIP, 25% complete, consisted of 20,000 units. What was the number of equivalent units of production using FIFO?

100% - 70% = 30% In beginning WIP to complete. 10,000 units x 30% = 3,000. 140,000 units completed - 10,000 units in beginning = 130,000 units started and completed. 20,000 In ending WIP x 25% = 5,000. 3,000 + 130,000 + 5,000 = 138,000 EUP

Dept. A completed and transferred to finished goods a total of 60,000 units. Their ending inventory consisted of 40,000 units which were 80% complete with respect to DM and 30% complete with respect to conversion costs. The cost per EUP for DM is $4.00 and the cost per EUP for conversion is $3.50. What is the cost of the ending WIP inventory?

40,000 x 80% = DM 32,000 x $4 = 128,000 40,000 x 30% = Conversion 12,000 x $3.50 = 42,000 128,000 + 42,000 = $170,000 in the ending WIP inventory.

Weighted Average - Step 3

Cost of beginning work in process inventory + cost incurred this period / equivalent units of production = cost per equivalent unit.

Dept. B beginning balance: 150 Units The Dept. started an additional 950 Units during the period and 975 Units were completed and transferred out. What was Dept. B ending WIP balance?

Beginning WIP balance 150 + Started 950 - Completed 975 = 125 Ending WIP balance.

Weighted Average - Step 1

Beginning work in process inventory + Units started this period = total units to ACCOUNT for. Units completed and transferred out + ending work in process inventory = total units ACCOUNTED for. These must reconcile.

Direct Labor and Factory Overhead are what?

Conversion Costs

During the period, the mixing department completed 500 units and transferred them out to the baking department. At the end of the period there were 4,000 units that are complete by 40% as to direct materials in the mixing department. What are the equivalent units in production for direct materials?

EUP for direct materials = Equivalent units completed and transferred out of 500 (500 x 100%) + Equivalent units for ending goods in process of 1,600 (or 4,000 x 40%) = 2,100

If a production department has a beginning or ending inventory of partially processed units, the cost of each unit transferred out of the department is computed by dividing the total cost assigned to the department by the ___________________________.

Equivalent Units of Production