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SOLUTION
1. Because direct materials are added at the beginning of the assembly process, the units in
SOLUTION EXHIBIT 17-31A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Assembly Department of Larsen Company for
October 2014.
(Step 1) (Step 2)
Equivalent Units
Physical Direct Conversion
Flow of Production Units Materials Costs
Work in process, beginning (given) 5,000
Started during current period (given) 20 , 0 00
To account for 25 , 0 00
2. To show better performance, a department supervisor might report a higher degree of
completion resulting in understated cost per equivalent unit and overstated operating income. If
performance for the period is very good, the department supervisor may be tempted to report a
To guard against the possibility of bias, managers should ask supervisors specific
3. & 4. Solution Exhibit 17-31B summarizes the total Assembly Department costs for October
SOLUTION EXHIBIT 17-31B
Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and Assign
Costs to the Units Completed and Units in Ending Work in Process Inventory; Weighted-Average
Method of Process Costing, Assembly Department of Larsen Company for October 2014.
Total
Production
Costs
Direct
Materials
Conversion
Costs
(Step 3) Work in process, beginning (given) $1,652,750 $1,250,000 $ 402,750
Costs added in current period (given) 6 ,837,5 00 4 ,5 00,000 2 ,337 , 5 00
Total costs to account for $ 8 ,490,250 $ 5 ,75 0,000 $ 2 ,740,25 0
*Equivalent units completed and transferred out from Solution Exhibit 17-31A, Step 2.
†Equivalent units in work in process, ending from Solution Exhibit 17-31A, Step 2.
17-32 (10 min.) Journal entries (continuation of 17-31).
Required:
Prepare a set of summarized journal entries for all October 2014 transactions affecting Work in
Process—Assembly. Set up a T-account for Work in Process—Assembly and post your entries to
it.
SOLUTION
1. Work in Process––Assembly Department 4,500,000
3. Work in Process––Testing Department 7,717,500
Work in Process––Assembly Department
Beginning inventory, October 1 1,652,750
17-33 (20 min.) FIFO method (continuation of 17-31).
Required:
1. Do Problem 17-31 using the FIFO method of process costing. Explain any difference
between the cost per equivalent unit in the assembly department under the weighted-average
method and the FIFO method.
2. Should Larsen’s managers choose the weighted-average method or the FIFO method?
Explain briefly.
SOLUTION
SOLUTION EXHIBIT 17-33A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units; FIFO Method
of Process Costing, Assembly Department of Larsen Company for October 2014.
(Step 1) (Step 2)
Equivalent Units
Flow of Production
Physical
Units
Direct
Materials
Conversion
Costs
Work in process, beginning (given)
(work done before current
period)
Completed and transferred out during current
period:
§Degree of completion in this department: direct materials, 100%; conversion costs, 60%.
The cost per equivalent unit of work done in the Assembly Department in October 2014 for
SOLUTION EXHIBIT 17-33B
Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed
and Units in Ending Work-in-Process Inventory; FIFO Method of Process Costing, Assembly Department of Larsen
Company for October 2014.
Total
Production
Costs
Direct
Materials
Conversion
Costs
(Step 3) Work in process, beginning (given) $1,652,750 $1,250,000 $ 402,750
(Step 4) Costs added in current period $4,500,000 $2,337,500
(Step 5) Assignment of costs:
Completed and transferred out (22,500 units):
1,872,750
$110)
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-33A, Step 2.
†Equivalent units started and completed from Solution Exhibit 17-33A, Step 2.
#Equivalent units in ending work in process from Solution Exhibit 17-33A, Step 2.
2. The cost per equivalent unit of beginning inventory and of work done in the current
period differ:
Beginning
Inventory
Work Done in
Current Period
Direct materials
Direct
Materials
Conversion
Costs
The cost per equivalent unit differs between the two methods because each method uses different
The following table summarizes the costs assigned to units completed and those still in
process under the weighted-average and FIFO process-costing methods for our example.
Weighted
Average
(Solution
Exhibit 17-31B)
FIFO
(Solution
Exhibit 17-33B) Difference
Cost of units completed and transferred out
The FIFO ending inventory is lower than the weighted-average ending inventory by $17,750.
This is because FIFO assumes that all the higher-cost prior-period units in work in process are
Larsen’s managers should consider the FIFO method because even though it shows lower
operating income and higher cost of goods sold, it lowers taxes. Managers may have an
17-34 (30 min.) Transferred-in costs, weighted-average method (related to 17-31 to 17-33).
Larsen Company, as you know, is a manufacturer of car seats. Each car seat passes through the
assembly department and testing department. This problem focuses on the testing department.
Direct materials are added when the testing department process is 90% complete. Conversion
costs are added evenly during the testing department’s process. As work in assembly is
completed, each unit is immediately transferred to testing. As each unit is completed in testing, it
is immediately transferred to Finished Goods.
Larsen Company uses the weighted-average method of process costing. Data for the testing
department for October 2014 are as follows:
aDegree of completion: transferred-in costs,?%; direct materials,?%; conversion costs, 70%.
bDegree of completion: transferred-in costs,?%; direct materials,?%; conversion costs, 60%.
Required:
1. What is the percentage of completion for (a) transferred-in costs and direct materials in
beginning work-in-process inventory and (b) transferred-in costs and direct materials in
ending work-in-process inventory?
2. For each cost category, compute equivalent units in the testing department. Show physical
units in the first column of your schedule.
3. For each cost category, summarize total testing department costs for October 2014, calculate
the cost per equivalent unit, and assign costs to units completed (and transferred out) and to
units in ending work in process.
4. Prepare journal entries for October transfers from the assembly department to the testing
department and from the testing department to Finished Goods.
SOLUTION
1. Transferred-in costs are 100% complete, and direct materials are 0% complete in both
beginning and ending work-in-process inventory. The reason is that transferred-in costs are
3. Solution Exhibit 17-34B summarizes total Testing Department costs for October 2014,
4. Journal entries:
a. Work in Process––Testing Department 7,717,500
b. Finished Goods 23,459,600
SOLUTION EXHIBIT 17-34A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Testing Department of Larsen Company for
October 2014.
(Step 1) (Step 2)
Equivalent Units
Flow of Production
Physical
Units
Transferred-i
n
Costs
Direct
Materials
Conversio
n
Costs
Work in process, beginning (given) 7,500
Transferred in during current period (given) 22 ,500
28,520
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
SOLUTION EXHIBIT 17-34B
Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed and Units in
Ending Work-in-Process Inventory; Weighted-Average Method of Process Costing, Testing Department of Larsen Company for October
2014.
Total
Production
Costs
Transferred
-in Costs
Direct
Materials
Conversion
Costs
(Step 3)Work in process, beginning (given) $ 3,767,960 $ 2,932,500 $ 0 $ 835,460
(Step 4) Costs incurred to date $10,650,000 $9,704,700 $4,791,360
(Step 5)Assignment of costs:
