Chapter 3, Problem 4PSB

Problem 16-4B Weighted average: Process cost summary; equivalent units; costs estimates C2 C3 P4

Switch Co. manufactures a single product in one department. Direct labor overhead are added evenly throughout the process. Direct materials are added as needed. The inventory, Its uses monthly reporting periods for its weighted-average process costing. During January, Switch completed and transferred 220,000 units of product to finished goods inventory. Its10.000 units of beginning work in process consisted of $7.500 of direct materials and $49.850 of conversion. In process at month-end are 40.000 units (50% complete with respect to direct materials and 30% complete with respect to conversion). During the month, the company used direct materials of $112,500 in production and incurred conversion costs of $616,000.

Required

1. Prepare the company’s process cost summary for January using the weighted-average method.
Check (1) EUP for conversion, 232.000

2. Prepare the Journal entry dated January 31 to transfer the cost completed units to finished goods inventory.

(2) Cost transferred out to finished goods, $741,400

Analysis Component

This cost accounting process depends on several estimates.

1. Identify two major estimates that affect the cost per equivalent unit.
2. In what direction might you anticipate a bias from management for each estimate in part 3a (assume that management compensation is based on maintaining low inventory amounts)? Explain your answer.