Hoyt, Inc. has a process costing system at its Forest Street Plant. All materials are introduced when conversion costs reach 40 percent. The following information is available for physical units during August: Units started in August... Units transferred out to Finishing Department in August.. Work in process, August 1 (85% complete as to conversion costs). Work in process, August 31 (25% complete as to conversion costs).. Required a Compute the equivalent units for materials costs and for conversion costs using the weighted-average method. b. Compute the equivalent units for materials costs and for conversion costs using the FIFO method. 163,000 178,000 41,000 26,000 c. The company president has been under considerable pressure to increase income. He tells the controller to change the estimated completion for ending work in process to 45 percent (from 25 percent). 1. What effect will this change have on the unit costs of units transferred to finished goods in August? 2. Would this be ethical? 3. Is this likely to be a successful strategy for affecting income over a long period of time?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
a. Calculation of equivalent units for materials costs and for Conversion Cost using under weighted -average method.
| Physical unit | % EUP | Material | % EUP | Conversion cost | |
| Units transferred out | 178000 | 100% | 178000 | 100% | 178000 |
| Ending work in process | 26000 | 0% | 0 | 25% | 6500 |
| Total | 204000 | 178000 | 184500 |
Conversion cost=178,000 + 26,000 *25%
=184,500
Materials=178,000 +26,000 * 0%
=204,000
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
