Chapter 20, Problem 4APSA

Problem 20-4A Weighted average: Process cost summary, equivalent units, cost estimates C2 C3 P4 Q

Tamar Co. manufactures a single product in two departments: Forming and Assembly. All direct materials are added at the beginning of the forming process. Conversion costs are added evenly throughout each process. During May, the Forming department started 21,600 units, and completed and transferred 22,200 units of product to the Assembly department. The Forming department's 3,000 units of beginning work in process consisted of $19,800 of direct materials and $221,940 of conversion costs. It has 2.400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $496,800 of direct materials costs and $2,165,940 of conversion costs were charged to the Forming department.

Required

1. Prepare the Forming department's process cost summary for May using the weighted-average method.

Check (1) EUP for conversion, 24,120

2. Prepare the journal entry dated May 31 to transfer the cost of units to Assembly.
(2) Cost transferred out. 12.664.000

Analysis Component

3. The costing process depends on numerous estimates.

a. Identify two major estimates that determine the cost per equivalent unit.

b. Assume management compensation is based on maintaining low inventory amounts. Is management more likely to overestimate or understimate the percentage complete?