Porter Handcraft is a manufacturer of picture frames for large retailers. Every
ID: 2420949 • Letter: P
Question
Porter Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: assembly and finishing. This problem focuses on the assembly department. The process-costing system at Porter has a single 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.
Porter uses the weighted-average method of process costing. Consider the following data for the assembly department in April 2015:
Physical Units (frames) Direct Materials Conversion Costs
Work in process, April 1* 75 $1,775 $135
Started during April 2015 550
Completed during April 2015 500
Work in process, April 30^ 125
Costs added during April 2015 $17,600 $10,890
* Degree of completion: direct materials, 100%; conversion costs, 40%
^ Degree of completion: direct materials, 100%; conversion costs, 20%
Required:
Summarize the total assembly department costs for April 2015, and assign total costs to units completed (and transferred out) and to units in ending work in process.
2) Prepare a set of summarized journal entries for all April transactions affecting Work in Process-Assembly. Set up a T-account for Work-in-Process-Assembly and post the entries to it.
Using the same information as outlined above, answer the requirements in 1) above using the FIFO method of process costing. 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.
Explanation / Answer
Weighted Average method
Equivalent Units
Equivalent Cost per unit
Statement of Allocation of Cost
Journal entries
1)
WIP Dr 17,600
Direcr materials Cr 17,600
2)
WIP Dr 10,890
Conversion cost Cr 10,890
3)
Inventory Dr $ 26,000
WIP Cr $ 26,000
T account WIP - Assembly
FIFO Method
Cost per equivalent unit
Statement of Allocation
The Difference between FIFO method and wieghted avg for Cost of work Completed
= $25,850 - $ 26,000 = - $ 150
The Difference between FIFO method and wieghted avg for Cost of Ending inventory
= $ 4,550 - $4,400 = $ 150
Particulars Units %age completion Material %age completion Conversion cost Completed units 500 100% 500 100% 500 Ending Inventory 125 100% 125 20% 25 Total 625 625 525