Problem 16-2A (Concluded)
Part 4
MEMORANDUM
TO:
FROM:
DATE:
RE: Percentage of Completion Error Analysis
If the units in ending inventory are 60% complete instead of 30% with
respect to conversion, the number of equivalent units in ending inventory
Regarding financial statements, this error causes an overstatement of cost
of goods sold and an understatement of net income on the income
Problem 16-3A (75 minutes)
Part 1
Weighted average
Units Fast Co. – units
Units in Beg. inventory 30,000 Beg. Inv 30,000
Units started 140,000 Started 140,000
FAST CO.
Process Cost Summary – Weighted Average Method
For the month ended October 31
Costs Charged to Production
Costs of beginning work in process
Direct materials……..……………………….……….………….…… $ 17,100
Conversion………..…………………………………………………….. 67,200 $ 84,300
Costs incurred this period
Direct materials……..……………………….……….………….…… 144,400
Unit cost information
Units to account for Units accounted for
Beginning work in process………..….….……….……..30,000 Completed & transferred out…...........150,000
0
[continued on next page]
Financial and Managerial Accounting, 6th Edition
Problem 16-3A (concluded)
Equivalent units of production
Direct
Materials Conversion
Units completed & transferred out..... 150,000 EUP 150,000 EUP
Cost per EUP
Direct
Materials Conversion
Cost of beginning work in process….. $17,100 $67,200
Costs incurred this period…............... 144,400 862,400
Cost assignment and reconciliation
Costs transferred out
Direct materials (150,000 EUP x $0.95 per EUP)..... $142,500
Conversion (150,000 x $5.60 per EUP)………………... 840,000 $ 982,500
Costs of ending work in process
Direct materials (20,000 EUP x $0.95 per EUP)....... 19,000
Part 2
Problem 16-4A (80 minutes)
Part 1
TAMAR CO.
Process Cost Summary – Weighted Average Method
For Month Ended May 31
Costs Charged to Production
Costs of beginning work in process
Direct materials……..……………………….……….………….……$ 19,800
Conversion………..…………………………………………………….. 221,940 $ 241,740
Costs incurred this period
Direct materials……..……………………….……….………….…… 496,800
Unit cost information
Equivalent units of production
Direct
Materials Conversion
Units completed & transferred out....... 22,200 EUP 22,200 EUP
Units of ending work in process.........
Direct materials (2,400 x 100%)........ 2,400 EUP
Cost per EUP
Direct
Materials Conversion
Cost of beginning work in process..... $ 19,800 $ 221,940
[Continued on next page]
Financial and Managerial Accounting, 6th Edition
Problem 16-4A (Concluded)
Cost assignment and reconciliation
Costs transferred out
Direct materials (22,200 EUP x $21.00 per EUP).................$ 466,200
Costs of ending work in process
Direct materials (2,400 EUP x $21.00 per EUP)...................50,400
Part 2
May 31 Finished Goods Inventory………………………..……….……2,664,000
Part 3
3a. Two major estimates are the: i) overhead allocation rate, and ii)
percentage of completion for materials and conversion.
3b. Management might want an overhead allocation rate that assigns the
least amount of overhead applied to their respective production
Problem 16-5A (80 minutes)
Part 1
TAMAR CO.
Process Cost Summary – FIFO Method
For Month Ended May 31
Costs Charged to Production
Costs of beginning work in process
Direct materials……..……………………….……….………….……$ 19,800
Conversion………..…………………………………………………….. 221,940 $ 241,740
Costs incurred this period
Unit cost information
Units to account for Units accounted for
Beginning work in process………..….….……….……..3,000 Completed & transferred out………..22,200
Equivalent units of production
Direct
Materials Conversion
Units to complete beginning WIP
Direct materials (3,000 x 0%)………….………….…0 EUP
Conversion (3,000 x 60%)………….…..….….…….. 1,800 EUP
Units started and completed…………...……….…...
19,200 EUP 19,200 EUP
[Continued on next page]
Financial and Managerial Accounting, 6th Edition
Problem 16-5A (Concluded)
Cost per EUP
Direct
Materials Conversion
Costs incurred this period…............... $ 496,800 $2,165,940
EUP
EUP
Cost assignment and reconciliation
Costs transferred out
Cost of beginning work in process………………….…... $ 241,740
Cost to complete beginning work in process
Costs of ending work in process
Direct materials (2,400 EUP x $23.00 per EUP)....... 55,200
Conversion (1,920 EUP x $94.50 per EUP).............. 181,440 236,640
Total costs accounted for……………..…….….……….….. $2,904,480
Part 2
Problem 16-6A (45 minutes)
1. Units in beginning inventory……………………………..…... 37,500
2. Equivalent units of production—FIFO
Direct
Equivalent units of production—FIFO Materials Conversion
Units to complete beginning Work in Process
Direct materials (37,500 x 40%)…..………….………...... 15,000
Conversion (37,500 x 60%)………………..…………….….. 22,500
Units started and completed…………..………………….…. 150,000 150,000
Units in ending work in process
3. Cost per equivalent unit of direct materials and conversion—FIFO
Direct
Cost per equivalent unit—FIFO Materials Conversion
Costs incurred this period………………..…….……….…… $ 505,035 $ 396,568
÷ Equivalent units of production (from part 2)…..…... 195,750 182,750
Financial and Managerial Accounting, 6th Edition
Problem 16-6A (Concluded)
4. Assignment of costs to output of department—FIFO
Costs of goods transferred out
Costs to complete beginning work in process
Direct materials (15,000 EUP x $2.58 per EUP)........ 38,700.00
Conversion (22,500 EUP x $2.17 per EUP)............... 48,825.00
Total costs to complete………………….…….….…………. 87,525.00
Cost of units started and completed this period
Total cost of units started and completed…..…….…. 712,500.00
Total costs of goods transferred out……………………… 902,593.00
Cost of ending work in process inventory
Direct materials (30,750 EUP x $2.58 per EUP)........ 79,335.00
Problem 16-7A (80 minutes)
Part 1
DENGO CO.—Roasting Department
Process Cost Summary – FIFO Method
For Month Ended October 31
Costs Charged to Production
Costs of beginning work in process
Direct materials……..……………………….……….………….…… $ 9,900
Conversion………..…………………………………………………….. 110,970 $ 120,870
Costs incurred this period
Direct materials……..……………………….……….………….…… 248,400
Unit cost information
Units to account for Units accounted for
Beginning work in process………..….….……….……..3,000 Completed & transferred out….…..... 22,200
Equivalent units of production
Direct
Materials Conversion
Units to complete beginning WIP
Direct materials (3,000 x 0%)………….………….… 0 EUP
Units of ending work in process
Direct materials (2,400 x 100%)……………..……..2,400 EUP
Financial and Managerial Accounting, 6th Edition