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17-35 (30 min.) Transferred-in costs, FIFO method (continuation of 17-34).
Refer to the information in Problem 17-34. Suppose that Larsen Company uses the FIFO method
instead of the weighted-average method in all of its departments. The only changes to Problem
17-34 under the FIFO method are that total transferred-in costs of beginning work in process on
October 1 are $2,800,000 (instead of $2,932,500) and that total transferred-in costs added during
October are $7,735,250 (instead of $7,717,500).
Required:
Using the FIFO process-costing method, complete Problem 17-34.
SOLUTION
3. Solution Exhibit 17-35B summarizes total Testing Department costs for October 2014,
completed and transferred out and to units in ending work in process using the FIFO method.
4. Journal entries:
a. Work in Process––Testing Department 7,735,250
b. Finished Goods 23,381,891
SOLUTION EXHIBIT 17-35A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units; FIFO Method
of Process Costing, Testing Department of Larsen Company for October 2014.
(Step 1)
(Step 2)
Equivalent Units
Flow of Production
Physical
Units
Transferred-
in Costs
Direct
Materials
Conversion
Costs
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
7,500
22 ,500
30 , 0 00
(work done before current period)
Completed and transferred out during current
period:
From beginning work in process§
7,500
§ Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 70%.
†26,300 physical units completed and transferred out minus 7,500 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
SOLUTION EXHIBIT 17-35B
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, 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) $ 3,635,460 $ 2,800,000 $ 0 $ 835,460
(Step 4) Costs added in current period $ 7,735,250 $9,704,700 $3,955,900
Divide by equivalent units of work done in
(Step 5) Assignment of costs:
Completed and transferred out (26,300 units):
Work in process, beginning (7,500 units)
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-35A, Step 2.
†Equivalent units started and completed from Solution Exhibit 17-35A, Step 2.
#Equivalent units in ending work in process from Solution Exhibit 17-35A, Step 2.
17-36 (25 min.) Weighted-average method.
McKnight Handcraft is a manufacturer of picture frames for large retailers. Every picture frame
passes through two departments: the assembly department and the finishing department. This
problem focuses on the assembly department. The process-costing system at McKnight has a
single direct-cost category (direct materials) and a single indirect-cost category (conversion
costs). Direct materials are added when the assembly department process is 10% complete.
Conversion costs are added evenly during the assembly department’s process.
McKnight uses the weighted-average method of process costing. Consider the following data
for the assembly department in April 2014:
aDegree of completion: direct materials, 100%; conversion costs, 40%.
bDegree of completion: direct materials, 100%; conversion costs, 15%.
Required:
1. Summarize the total assembly department costs for April 2014, and assign them to units
completed (and transferred out) and to units in ending work in process.
2. What issues should a manager focus on when reviewing the equivalent units calculation?
SOLUTION
1. Solution Exhibit 17-36A shows equivalent units of work done to date of
Note that direct materials are added when the Assembly Department process is 10%
Solution Exhibit 17-35B summarizes the total Assembly Department costs for April
SOLUTION EXHIBIT 17-36A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Assembly Department of McKnight Handcraft
for April 2014.
(Step 1) (Step 2)
Equivalent Units
Physical Direct Conversion
Flow of Production Units Materials Costs
Work in process, beginning (given) 60
Started during current period (given) 510
*Degree of completion in this department: direct materials, 100%; conversion costs, 15%.
SOLUTION EXHIBIT 17-36B
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 McKnight Handcraft
for April 2014.
Total
Production
Costs
Direct
Materials
Conversion
Costs
(Step 3) Work in process, beginning (given) $ 1,686 $ 1,530 $ 156
Costs added in current period (given) 29,394 17 ,850 11 ,544
Total costs to account for $ 31,080 $ 19 ,380 $ 11 ,700
*Equivalent units completed and transferred out from Solution Exhibit 17-36A, Step 2.
†Equivalent units in ending work in process from Solution Exhibit 17-36A, Step 2.
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
To guard against the possibility of bias, managers should ask supervisors specific
17-37 (20 min.) FIFO method (continuation of 17-36).
Required:
1. Complete Problem 17-36 using the FIFO method of process costing.
2. If you did Problem 17-36, explain any difference between the cost of work completed and
transferred out and the cost of ending work in process in the assembly department under the
weighted-average method and the FIFO method. Should McKnight’s managers choose the
weighted-average method or the FIFO method? Explain briefly.
