Because of the availability of equipment and labor, Clear View has started makin
ID: 2412520 • Letter: B
Question
Because of the availability of equipment and labor, Clear View has started making mass market picture frames at its Orlando, Florida plant with the excess capacity. Clear View has determined that process costing would be most appropriate for this product. Management wants to know the differences between using the Weighted Average and FIFO methods
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 Clear View 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.
Consider the following data for the assembly department in April 2014:
Degree of completion: direct materials, 100%; conversion costs, 40%.
Degree of completion: direct materials, 100%; conversion costs, 15%.
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 using the weighted average method.
What issues should a manager focus on when reviewing the equivalent units calculation?
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 using the FIFO method.
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 Clear View's managers choose the weighted-average method or the FIFO method? Explain briefly.
I have started the first two parts
Project Part II Section I Summarize the Flow of Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing, Assembly Department of Clear View for April 2014. Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process, beginning 60 Started during current period 510 To account for 570 Completed and transferred out during current period 450 450 450 Work in process, ending 120 120 18 Accounted for 570 Equivalent units of work done to date 570 468 Direct materials = 570 Conversion costs = 468 Total Production Direct Conversion Costs Materials Costs Work in process, beginning $1,686 $1,530 $156 Costs added in current period 29,394 17,850 11,544 Total costs to account for $31,080 $1,530 $156 Costs incurred to date 29394 $17,850 $11,544 equivalent units of work done 570 468 Cost per equivalent unit 59 $34 $25 Assignment of costs: Completed and transferred out 26550 15300 11250 Work in process, ending 4,530 4080 450 Total costs accounted for $31,080 $19,380 $11,700 A manager should take into account the following issues, the proper degree of the completion should be taken so that the equivalent cost per unit should not be understated. If the calculation equivalent units is correct then it also helps in stating the correct ending inventory and operating income. Project Part II Section 2 FIFO Method Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process, beginning 60 Started during current period 510 To account for 570 Completed and transferred out 60 0 36 Started and Completed 390 390 390 Work in process, ending 120 120 18 Accounted for 570 Equivalent units of work done to date 510 444 Total Production Direct Conversion Costs Materials Costs Work in process, beginning $1,686 Costs added in current period 29,394 Total costs to account for $31,080 Costs added in current period 29394 17850 11544 Equivalent Units from row 65 510 444 Cost per Equivalent Unit 61 35 26 Assignment of costs: Completed and transferred out : WIP Beginning Inventory Costs added to Beginning WIP Total from Beginning Inventory Started and Completed Total WIP and Transferred Out Work in process, ending Total costs accounted for The following table summarizes the costs assigned to units completed and those still in process under the weighted-average and FIFO process-costing methods Weighted Average FIFO Difference Cost of units completed and transferred out Work in process, ending Total costs accounted for Explain differencesExplanation / Answer
Project Part II Section I Summarize the Flow of Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing, Assembly Department of Clear View for April 2014. Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process, beginning 60 Started during current period 510 To account for 570 Completed and transferred out during current period 450 450 450 Work in process, ending 120 120 18 Accounted for 570 Equivalent units of work done to date 570 468 Direct materials = 570 Conversion costs = 468 Total Production Direct Conversion Costs Materials Costs Work in process, beginning $1,686 $1,530 $156 Costs added in current period 29,394 17,850 11,544 Total costs to account for $31,080 $19,380 $11,700 Costs incurred to date 29394 $17,850 $11,544 equivalent units of work done 570 468 Cost per equivalent unit 59 $34 $25 Assignment of costs: Completed and transferred out 26550 15300 11250 Work in process, ending 4,530 4080 450 Total costs accounted for $31,080 $19,380 $11,700 A manager should take into account the following issues, the proper degree of the completion should be taken so that the equivalent cost per unit should not be understated. If the calculation equivalent units is correct then it also helps in stating the correct ending inventory and operating income. Project Part II Section 2 FIFO Method Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process, beginning 60 Started during current period 510 To account for 570 Completed and transferred out 60 0 36 Started and Completed 390 390 390 Work in process, ending 120 120 18 Accounted for 570 Equivalent units of work done to date 510 444 Total Production Direct Conversion Costs Materials Costs Work in process, beginning $1,686 Costs added in current period 29,394 Total costs to account for $31,080 Costs added in current period 29394 17850 11544 Equivalent Units from row 65 510 444 Cost per Equivalent Unit 61 35 26 Assignment of costs: Completed and transferred out : 450 WIP Beginning Inventory $1,686 - - Costs added to Beginning WIP $936 - $936 Total from Beginning Inventory $2,622 Started and Completed $23,790 $13,650 $10,140 Total WIP and Transferred Out $26,412 Work in process, ending $4,668 $4,200 $468 Total costs accounted for $31,080 $17,850 $11,544 The following table summarizes the costs assigned to units completed and those still in process under the weighted-average and FIFO process-costing methods Weighted Average FIFO Difference Cost of units completed and transferred out $26,550 $26,412 $138 Work in process, ending $4,530 $4,668 ($138) Total costs accounted for $31,080 $31,080 $276 Explain differences OPENING COST DIFFERECE