SOLUTIO
(10 min.) Journal entries (continuation of 17-36).
1. Work in Process––Assembly Department 4,635,000
Accounts Payable 4,635,000
Work in Process––Assembly Department
17-38 FIFO method (continuation of 17-36).
Required:
1. Do Problem 17-36 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 Hoffman’s managers choose the weighted-average method or the FIFO method?
Explain briefly.
SOLUTION
(20 min.) FIFO method (continuation of 17-36).
1. The equivalent units of work done in the Assembly Department in October 2017 for
direct materials and conversion costs are shown in Solution Exhibit 17-38A.
SOLUTION EXHIBIT 17-38A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Assembly Department of Hoffman Company for October 2017.
(Step 1) (Step 2)
Equivalent Units
Flow of Production
Physical
Units
Direct
Materials
Conversion
Costs
Completed and transferred out during current
period:
From beginning work in process§
4,000 (100% 100%); 4,000 (100%
45%) 4,000 0 2,200
§Degree of completion in this department: direct materials, 100%; conversion costs, 45%.
†26,000 physical units completed and transferred out minus 4,000 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 65%
The cost per equivalent unit of work done in the Assembly Department in October 2017 for
direct materials and conversion costs is calculated in Solution Exhibit 17-38B. This exhibit also
summarizes the total Assembly Department costs for October 2017, and assigns these costs to
units completed (and transferred out) and units in ending work in process under the FIFO
method.
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;
FIFO Method of Process Costing, Assembly Department of Hoffman Company for
October 2017.
Total
Production
Costs
Direct
Materials
(Step 3) Work in process, beginning (given) $1,489,650 $1,248,000
Costs added in current period (given) 7 ,210,125 4 ,635 ,000
Total costs to account for $ 8 ,699,775 $5 ,750,000
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-38A, Step 2.
†Equivalent units started and completed from Solution Exhibit 17-38A, Step 2.
#Equivalent units in ending work in process from Solution Exhibit 17-38A, 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
$312.00 ($1,248,000 4,000 equiv. units)
$206.00
Direct
Materials
Conversion
Costs
* from Solution Exhibit 17-36B
**from Solution Exhibit 17-38B
The cost per equivalent unit differs between the two methods because each method uses different
costs as the numerator of the calculation. FIFO uses only the costs added during the current
period whereas weighted-average uses the costs from the beginning work-in-process as well as
costs added during the current period. Both methods also use different equivalent units in the
denominator.
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 17-38B) Difference
The FIFO ending inventory is lower than the weighted-average ending inventory by $8,650. This
is because FIFO assumes that all the higher-cost prior-period units in work in process are the first
to be completed and transferred out while ending work in process consists of only the lower-cost
Hoffman’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
17-39 Transferred-in costs, weighted-average method (related to 17-36 to 17-38). Hoffman
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.
Hoffman Company uses the weighted-average method of process costing. Data for the testing
department for October 2017 are as follows:
Physical
Units (Car
Seats)
Transferred-
In Costs
Direct
Materials
Conversion
Costs
Work in process, October 1a5,500 $2,931,000 $ 0 $ 499,790
Transferred in during
October 2017
?
Completed during October
2017
29,800
Work in process, October
31b
1,700
Total costs added during
October 2017
$8,094,000 $10,877,000 $4,696,260
aDegree of completion: transferred-in costs,?%; direct materials,?%; conversion costs,
65%.
bDegree of completion: transferred-in costs,?%; direct materials,?%; conversion costs,
45%.
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 2017, 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
(30 min.) Transferred-in costs, weighted-average method (related to 17-36 to 17-38).
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
always 100% complete as soon as they are transferred in from the Assembly Department to the
2. Solution Exhibit 17-39A computes the equivalent units of work done to date in the
Testing Department for transferred-in costs, direct materials, and conversion costs.
3. Solution Exhibit 17-39B summarizes total Testing Department costs for October 2017,
4. Journal entries:
a. Work in Process––Testing Department 8,094,000
Work in Process––Assembly Department 8,094,000
Cost of goods completed and transferred out
during October from the Assembly
Department to the Testing Department
SOLUTION EXHIBIT 17-39A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing,
Testing Department of Hoffman Company for October 2017.
(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) 5,500
Transferred in during current period (given) 26 ,000
30,565
SOLUTION EXHIBIT 17-39B
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 Hoffman Company for October 2017.
Total
Production
Costs
Transferred
-in Costs
Direct
Materials
(Step 3)Work in process, beginning (given) $ 3,430,790 $ 2,931,000 $ 0
Costs added in current period (given) 23,667,260 8 ,094,000 10
Total costs to account for $ 27,098,050 $ 11 ,025,000 $ 10
*Equivalent units completed and transferred out from Solution Exhibit 17-39A, Step 2.
†Equivalent units in ending work in process from Solution Exhibit 17-39A, Step 2.
17-40 Transferred-in costs, FIFO method (continuation of 17-39). Refer to the information
in Problem 17-39. Suppose that Hoffman Company uses the FIFO method instead of the
weighted-average method in all of its departments. The only changes to Problem 17-39 under the
FIFO method are that total transferred-in costs of beginning work in process on October 1 are
$2,879,000 (instead of $2,931,000) and that total transferred-in costs added during October are
$9,048,000 (instead of $8,094,000).
Required:
Using the FIFO process-costing method, complete Problem 17-39.
SOLUTION
(30 min.) Transferred-in costs, FIFO method (continuation of 17-39).
1. As explained in Problem 17-39, requirement 1, transferred-in costs are 100% complete
and direct materials are 0% complete in both beginning and ending work-in-process inventory.
2. The equivalent units of work done in October 2017 in the Testing Department for
3. Solution Exhibit 17-40B summarizes total Testing Department costs for October 2017,
4. Journal entries:
Cost of goods completed and transferred out
during October from the Testing Department
to Finished Goods inventory.
SOLUTION EXHIBIT 17-40A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Testing Department of Hoffman Company for October 2017.
(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
5,500
26 ,000
31 ,500
(work done before current period)
Completed and transferred out during current
period:
§ Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 65%.
†29,800 physical units completed and transferred out minus 5,500 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, 45%.
SOLUTION EXHIBIT 17-40B
Total
Production
Costs
Transferred-in
Costs
Direct
Materials
(Step 3) Work in process, beginning (given) $ 3,378,790 $ 2,879,000 $ 0
(Step 4) Costs added in current period $ 9,048,000 $10,877,000
(Step 5) Assignment of costs:
Completed and transferred out (29,800 units):
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-40A, Step 2.
†Equivalent units started and completed from Solution Exhibit 17-40A, Step 2.
#Equivalent units in ending work in process from Solution Exhibit 17-40A, Step 2. 17-41 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 2017:
Physical Unit
(Frames)
Direct
Materials
Conversio
n Costs
Work in process, April 1a60 $ 1,530 $ 156
Required:
1. Summarize the total assembly department costs for April 2017, 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?