Weighted-average method. Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Larsen Company has a single direct-cost cat- egory (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing. Larsen Company uses the weighted-average method of process costing. Data for the assembly depart- ment for October 2017 are as follows: Car Seats Direct Materials Coversion Costs Work in process, Oct 1 5000 $ 1250000 § 402750 Started during October 2017 20000 Completed Oct 2017 22500 Work in Process, Oct 31 2500 Total costs addid during Oct. 2017 $ 4500000 $ 2337500 "Degree of completion: direct materials,?%; conversion costs, 60%. Degree of completion: direct materials,?%; conversion costs, 70%.
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.
17-36 Weighted-average method. Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Larsen Company has a single direct-cost cat- egory (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing. Larsen Company uses the weighted-average method of
| Car Seats | Direct Materials | Coversion Costs | |
| Work in process, Oct 1 | 5000 | $ 1250000 | § 402750 |
| Started during October 2017 | 20000 | ||
| Completed Oct 2017 | 22500 | ||
| Work in Process, Oct 31 | 2500 | ||
| Total costs addid during Oct. 2017 | $ 4500000 | $ 2337500 |
"Degree of completion: direct materials,?%; conversion costs, 60%.
Degree of completion: direct materials,?%; conversion costs, 70%.
1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule. 2. What issues should the manager focus on when reviewing the equivalent units calculation? 3. For each cost category, summarize total assembly department costs for October 2017 and calculate the cost per equivalent unit. 4. Assign costs to units completed and transferred out and to units in ending work in process.
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FIFO method (continuation of 17-36).
1. Do Problem 17-36 using the FIFO method of
equivalent unit in the assembly department under the weighted-average method and the FIFO method.
2. Should Larsen’s managers choose the weighted-average method or the FIFO method? Explain briefly.
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