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SOLUTION
1. & 2. The equivalent units of work done in April 2014 in the Assembly Department for direct
materials and conversion costs are shown in Solution Exhibit 17-37A.
Solution Exhibit 17-37B summarizes the total Assembly Department costs for April 2014,
The equivalent units of work done in beginning inventory is direct materials, 60 100% =
Beginning
Inventory
Work Done in
Current Period
(Calculated Under
FIFO Method)
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 17-36B)
FIFO
(Solution
Exhibit 17-37B) Difference
–$138
+$138
The FIFO ending inventory is higher than the weighted-average ending inventory by $138.
This is because FIFO assumes that all the lower-cost prior-period units in work in process are the
Given the relatively small difference in the income numbers generated by the two
methods, McKnight’s managers would likely be indifferent between the two methods. If the
differences are expected to be larger in future years, the managers should decide on the firm’s
SOLUTION EXHIBIT 17-37A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing, Assembly Department of McKnight Handcraft for April 2014.
(Step 1)
(Step 2)
Equivalent Units
Flow of Production
Physical
Units
Direct
Materials
Conversion
Costs
Work in process, beginning (given)
Started during current period (given)
To account for
60
51 0
570
(work done before current
period)
§Degree of completion in this department: direct materials, 100%; conversion costs, 40%.
†450 physical units completed and transferred out minus 60 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 15%.
SOLUTION EXHIBIT 17-37B
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 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
(Step 4) Costs added in current period $17,850 $11,544
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-37A, Step 2.
†Equivalent units started and completed from Solution Exhibit 17-37A, Step 2.
#Equivalent units in ending work in process from Solution Exhibit 17-37A, Step 2.
17.38 (30 min.) Transferred-in costs, weighted average.
Publishers, Inc., has two departments: printing and binding. Each department has one direct-cost
category (direct materials) and one indirect-cost category (conversion costs). This problem
focuses on the binding department. Books that have undergone the printing process are
immediately transferred to the binding department. Direct material is added when the binding
process is 70% complete. Conversion costs are added evenly during binding operations. When
those operations are done, the books are immediately transferred to Finished Goods. Publishers,
Inc., uses the weighted-average method of process costing. The following is a summary of the
April 2014 operations of the binding department.
Required:
1. Summarize total binding department costs for April 2014, and assign these costs to units
completed (and transferred out) and to units in ending work in process.
2. Prepare journal entries for April transfers from the printing department to the binding
department and from the binding department to Finished Goods.
SOLUTION
1. Solution Exhibit 17-38A computes the equivalent units of work done to date in the
Solution Exhibit 17-38B summarizes total Binding Department costs for April 2014,
2. Journal entries:
a. Work in Process–– Binding Department 155,520
b. Finished Goods 264,708
SOLUTION EXHIBIT 17-38A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Binding Department of Publishers, Inc., for April
2014.
(Step 1) (Step 2)
Equivalent Units
Flow of Production
Physical
Units
Transferred-i
n Costs
Direct
Materials
Conversion
Costs
Work in process, beginning (given) 1,260
aDegree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs,
70%.
SOLUTION EXHIBIT 17-38B
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, Binding
Department of Publishers, Inc., for April 2014.
Total
Production
Costs
Transferred-in
Costs
Direct
Materials
Conversion
Costs
(Step 3) Work in process, beginning (given) $ 55,440 $ 39,060 $ 0 $16,380
(Step 4) Costs incurred to date $194,580 $28,188 $100,620
(Step 5) Assignment of costs:
× $47.00) + (0 b
× $8.70) + ( 630 b
× $26)
a Equivalent units completed and transferred out from Sol. Exhibit 17-38A, step 2.
b Equivalent units in ending work in process from Sol. Exhibit 17-38A, step 2.
17-39 (30 min.) Transferred-in costs, FIFO method (continuation of 17-38).
Refer to the information in Problem 17-38. Suppose that Publishers, Inc., uses the FIFO method
instead of the weighted-average method in all of its departments. The only changes to Problem
17-38 under the FIFO method are that total transferred-in costs of beginning work in process on
April 1 are $44,100 (instead of $39,060) and that total transferred-in costs added during April are
$149,760 (instead of $155,520).
Required:
1. Using the FIFO process-costing method, complete Problem 17-38.
2. If you did Problem 17-38, explain any difference between the cost of work completed and
transferred out and the cost of ending work in process in the binding department under the
weighted-average method and the FIFO method.
SOLUTION
1. Solution Exhibit 17-39A calculates the equivalent units of work done in April 2014 in the
Solution Exhibit 17-39B summarizes total Binding Department costs for April 2014,
Journal entries:
a. Work in Process–– Binding Department 149,760
b. Finished Goods 259,488
Work in Process–– Binding Department 259,488
2. The equivalent units of work done in beginning inventory is as follows: Transferred-in
Beginning
Inventory
Work Done in
Current Period
Transferred-in costs (weighted average)
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 the Binding
Department.
Weighted
Average
(Solution
Exhibit 17-38B)
FIFO
(Solution
Exhibit 17-39B) Difference
Cost of units completed and transferred out
–$5,220
The FIFO ending inventory is higher than the weighted-average ending inventory by
$4,500. This is because FIFO assumes that all the lower-cost prior-period units in work in
process (resulting from the lower transferred-in costs in beginning inventory) are the first to be
