Question & Answer: Exercise 1) Having Fun Filters produces an air filter for use in accounting classrooms. Parts are added at several points in their production process. In August, produc…..

Exercise 1) Having Fun Filters produces an air filter for use in accounting classrooms. Parts are added at several points in their production process. In August, production began with 1,400 filters in work in process, 70 percent complete as to materials and 60 percent complete as to labor and overhead. During the month, an additional 6,400 units were started into production. Sixteen hundred filters were in work in process at the end of the month, and they were 50 percent complete as to materials and 40 percent complete as to labor and overhead. Having Fun Filters uses the Weighted-Average method. Cost information for August Beginning WIP Inventory Cost Added in August Direct material Direct labor Manufacturing overhead $ 94.000 S 33,000 S 35,000 s 253,810 S 97,542 S 612.348 S 963.700 Total S162,000 Required (complete the cost template to answer these questions) 1. Calculate the cost per equivalent unit for materials and conversion costs. 2. Calculate the cost of items completed in August and the cost of ending WIP inventory. Exercise 2) Repeat Exercise 1 assuming that Having Fun Filters used the First In, First Out method Exercise 3) At the start of period, Wallys Wacky Wigs had work in process inventory consisting of 2,500 units that were 58 percent complete with respect to materials and 27 percent complete with respect to conversion costs. The cost of the units was $81,340 ($41,785 of material cost, $25,110 of labor, and $14,445 of overhead). A total of 6,660 units were completed and transferred to the next department. During the period, the company incurred $25,054 of material cost and S64 ,800 of conversion costs (47% of this cost was labor). There were 5,210 units in ending work in process that were 79 percent complete with respect to materials and 32 percent complete with respect to conversion costs. Transferred-in costs consisted of $22,222 in beginning work in process and $77,777 added during the period. Wallys Wacky Wigs uses the Weighted-Average method. Required (complete the cost template to answer these questions) 1. Calculate the cost per equivalent unit for transferred-in costs, materials, and conversion. 2. Calculate the cost of items completed (COGM) during the period. 3. Calculate the cost of ending work in process. Exercise 4) Repeat Exercise 3 assuming that Wallys Wacky Wigs used the First In, First Out method.

Exercise 1) Having Fun Filters produces an air filter for use in accounting classrooms. Parts are added at several points in their production process. In August, production began with 1,400 filters in work in process, 70 percent complete as to materials and 60 percent complete as to labor and overhead. During the month, an additional 6,400 units were started into production. Sixteen hundred filters were in work in process at the end of the month, and they were 50 percent complete as to materials and 40 percent complete as to labor and overhead. Having Fun Filters uses the Weighted-Average method. Cost information for August Beginning WIP Inventory Cost Added in August Direct material Direct labor Manufacturing overhead $ 94.000 S 33,000 S 35,000 s 253,810 S 97,542 S 612.348 S 963.700 Total S162,000 Required (complete the cost template to answer these questions) 1. Calculate the cost per equivalent unit for materials and conversion costs. 2. Calculate the cost of items completed in August and the cost of ending WIP inventory. Exercise 2) Repeat Exercise 1 assuming that Having Fun Filters used the First In, First Out method Exercise 3) At the start of period, Wally’s Wacky Wigs had work in process inventory consisting of 2,500 units that were 58 percent complete with respect to materials and 27 percent complete with respect to conversion costs. The cost of the units was $81,340 ($41,785 of material cost, $25,110 of labor, and $14,445 of overhead). A total of 6,660 units were completed and transferred to the next department. During the period, the company incurred $25,054 of material cost and S64 ,800 of conversion costs (47% of this cost was labor). There were 5,210 units in ending work in process that were 79 percent complete with respect to materials and 32 percent complete with respect to conversion costs. Transferred-in costs consisted of $22,222 in beginning work in process and $77,777 added during the period. Wally’s Wacky Wigs uses the Weighted-Average method. Required (complete the cost template to answer these questions) 1. Calculate the cost per equivalent unit for transferred-in costs, materials, and conversion. 2. Calculate the cost of items completed (COGM) during the period. 3. Calculate the cost of ending work in process. Exercise 4) Repeat Exercise 3 assuming that Wally’s Wacky Wigs used the First In, First Out method.

Expert Answer

 

ANSWERS

Exercise 1 – Weighted Average Method

  • Cost per Equivalent Unit calculation
Opening WIP 1400
Introduced 6400 Equivalent units
TOTAL 7800 Direct Material Direct labour manufacturing Overhead
(-)Transferred 6200 6200 (100%) 6200 (100%) 6200 (100%)
Closing WIP 1600 800 (50%) 640 (40%) 640 (40%)
TOTAL equivalent units (B) 7000 6840 6840
Total Cost Direct Material Direct labour manufacturing Overhead TOTAL
Opening WIP 33000 35000 94000 162000
Cost added 253810 97542 612348 963700
TOTAL cost (A) 286810 132542 706348 1125700
Cost per Equivalent units
Direct Material Direct labour manufacturing Overhead
Total Cost (A) 286810 132542 706348
Units (B) 7000 6840 6840
Cost/unit (A/B) 40.97 19.38 103.27
  • Cost of Item completed in August and Closing WIP
Cost of Items
Completed Units Closing WIP
Units 6200 Units Cost
DM @40.97 254031.7 800 32778.29
DL @ 19.38 120140.4 640 12401.59
MO @103.27 640257 640 66091.04
TOTAL 1014429 TOTAL 111270.9

Exercise 2 – FIFO Method

  • Cost per Equivalent Unit calculation
Opening WIP 1400
Introduced 6400
TOTAL 7800
(-)Transferred 6200 * 1400 completed from Opening WIP, remaining completed 4800 during the month
Closing WIP 1600
Equivalent units
Units Direct Material Direct labour manufacturing Overhead
(Op WIP)1400 420 (30%) 560 (40%) 560 (40%)
(Remaining)4800 4800 (100%) 4800 (100%) 4800 (100%)
(Closing WIP)1600 800 (50%) 640 (40%) 640 (40%)
7800 6020 6000 6000
Total Cost Direct Material Direct labour manufacturing Overhead TOTAL
Opening WIP 33000 35000 94000 162000
Cost added 253810 97542 612348 963700
TOTAL cost 286810 132542 706348 1125700
Cost per Equivalent units
Direct Material Direct labour manufacturing Overhead
Total Cost 286810 132542 706348
Units 6020 6000 6000
Cost/unit 47.64 22.09 117.72
  • Cost of Item completed in August and Closing WIP
Opening WIP Completed Closing WIP
Cost Units Cost Units Cost Units Cost
Direct Material @ 47.64 420 20010 4800 228685.7 800 38114.29
Direct labour @ 22.09 560 12370.59 4800 106033.6 640 14137.81
manufacturing Overhead @ 117.72 560 65925.81 4800 565078.4 640 75343.79
Total Cost $ 1,125,700 98306.4 899797.7 127595.9

Exercise 3 – Weighted Average Method

  • Cost per Equivalent Unit calculation
Opening WIP 2500
Introduced 9370 Equivalent units
TOTAL 11870 Direct Material Direct labour manufacturing Overhead
(-)Transferred 6660 6660 (100%) 6660 (100%) 6660 (100%)
Closing WIP 5210 4115.9 (79%) 1667.2 (32%) 1667.2 (32%)
TOTAL equivalent units 10775.9 8327.2 8327.2
Total Cost Direct Material Direct labour manufacturing Overhead TOTAL
Opening WIP 41785 25110 14445 81340
Cost added 25054 30456 34344 89854
TOTAL cost 66839 55566 48789 171194
Cost per Equivalent units
Direct Material Direct labour manufacturing Overhead
Total Cost 66839 55566 48789
Units 10775.9 8327.2 8327.2
Cost/unit 6.20 6.67 5.86
  • Cost of Item completed and Closing WIP
Cost of Items
Completed Units Closing WIP
Units 6660 Units Cost
DM @6.2 41309.56 4115.9 25529.44
DL @ 6.67 44441.06 1667.2 11124.94
MO @5.86 39020.89 1667.2 9768.112
TOTAL 124771.5 TOTAL 46422.49

Exercise 4 – FIFO Method

  • Cost per Equivalent Unit calculation
Opening WIP 2500
Introduced 9370
TOTAL 11870
(-)Transferred 6660 * 2500 completed from Opening WIP, remaining completed 4160 during the month
Closing WIP 5210
Equivalent units
Units Direct Material Direct labour manufacturing Overhead
2500 1050 (42%) 1825 (73%) 1825 (73%)
4160 4160 (100%) 4160 (100%) 4160 (100%)
5210 4115.9 (79%) 1667.2 (32%) 1667.2 (32%)
11870 9325.9 7652.2 7652.2
Total Cost Direct Material Direct labour manufacturing Overhead TOTAL
Opening WIP 41785 25110 14445 81340
Cost added 25054 30456 34344 89854
TOTAL cost 66839 55566 48789 171194
Cost per Equivalent units
Direct Material Direct labour manufacturing Overhead
Total Cost 66839 55566 48789
Units 9325.9 7652.2 7652.2
Cost/unit 7.17 7.26 6.38
  • Cost of Item completed in August and Closing WIP
Opening WIP Completed Closing WIP
Cost Units Cost Units Cost Units Cost
Direct Material @ 7.17 1050 7525.381 4160 29814.84 4115.9 29498.78
Direct labour @ 7.26 1825 13252.13 4160 30207.6 1667.2 12106.27
manufacturing Overhead @ 6.38 1825 11635.86 4160 26523.38 1667.2 10629.76
Total Cost $ 171,194 32413.37 86545.82 52234.81
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