FUNDAMENTALS OF COST ACCOUNTING
FUNDAMENTALS OF COST ACCOUNTING
6th Edition
ISBN: 9781264192236
Author: LANEN, ANDERSO
Publisher: McGraw Hil
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Chapter 8, Problem 54P

a.

To determine

Prepare a production cost report using FIFO.

a.

Expert Solution
Check Mark

Explanation of Solution

First in and first out (FIFO) method:

Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.

Compute the total units of prior department, materials, labor and manufacturing overhead:

ParticularsPhysical unitsPrior departmentMaterialsLaborManufacturing overhead
Beginning work-in-process inventory75,000
Units started this period375,000
Total units450,000
 
Completed and transferred out
Beginning work-in-process inventory 75,000--30,000(1)37,500(2)
Started and currently completed225,000225,000225,000225,000225,000
Units in ending work-in-process inventory150,000150,000135,000(3)105,000(4)52,500(5)
Total units450,000375,000360,000360,000315,000

Table: (1)

Compute the cost per equivalent unit of prior department, materials, labor and manufacturing overhead:

ParticularsTotalPrior departmentMaterialsLaborManufacturing overhead
Costs in beginning work-in-process inventory $ 382,800$ 192,000$ 120,000$ 43,200$ 27,600
Current period costs $ 1,865,400$ 960,000$ 576,000$ 216,000$ 113,400
Total costs $ 2,248,200$ 1,152,000$ 696,000$ 259,200$ 141,000
      
Cost per equivalent unit     
Prior department $ 2.56(6)   
Materials  $ 1.60(7)  
Labor   $ 0.60(8) 
Manufacturing overhead    $ 0.36(9)

Table: (2)

Compute the total cost of prior department, materials, labor and manufacturing overhead:

ParticularsTotalPrior departmentMaterialsLaborManufacturing overhead
Transferred out:     
Costs from beginning inventory$ 382,800$ 192,000$ 120,000$ 43,200$ 27,600
Current costs beginning work-in-process inventory     
Prior department $ 0$ 0   
Materials$ 0 $ 0  
Labor$ 18,000  $ 18,000(10) 
Manufacturing overhead$ 13,500   $ 13,500(11)
Total costs$ 414,300    
      
Current costs of units started and completed     
Prior department $ 576,000$ 576,000(12)   
Materials$ 360,000 $ 360,000(13)  
Labor$ 135,000  $ 135,000(14) 
Manufacturing overhead$ 81,000   $ 81,000(15)
Total costs of units started and completed$ 1,152,000    
Total costs$ 1,566,300$ 576,000$ 360,000$ 153,000$ 94,500
Current costs work-in-process ending inventory     
Prior department $ 384,000$ 384,000(16)   
Materials$ 216,000 $ 216,000(17)  
Labor$ 63,000  $ 63,000(18) 
Manufacturing overhead$ 18,900   $ 18,900(19)
Total ending work-in-process inventory$ 681,900    
Total costs accounted for$ 2,279,700$ 1,152,000$ 696,000$ 277,200$ 154,500

Table: (3)

Working note 1:

Compute the beginning inventory:

Beginninginventory=(1-Completionrate)×Beginninginventory=(1-60%)×75,000=40%×75,000=30,000

Working note 2:

Compute the beginning inventory:

Beginninginventory=(1-Completionrate)×Beginninginventory=(1-50%)×75,000=50%×75,000=37,500

Working note 3:

Compute the units in ending inventory:

Endinginventory=Completionrate×Unitsinendinginventory=90%×150,000=135,000

Working note 4:

Compute the units in ending inventory:

Endinginventory=Completionrate×Unitsinendinginventory=70%×150,000=105,000

Working note 5:

Compute the units in ending inventory:

Endinginventory=Completionrate×Unitsinendinginventory=35%×150,000=52,500

Working note 6:

Compute the cost per equivalent unit:

Costperequivalentunit=CurrentperiodcostsTotalunitsaccountedfor=$960,000375,000=$2.56

Working note 7:

Compute the cost per equivalent unit:

Costperequivalentunit=CurrentperiodcostsTotalunitsaccountedfor=$576,000360,000=$1.60

Working note 8:

Compute the cost per equivalent unit:

Costperequivalentunit=CurrentperiodcostsTotalunitsaccountedfor=$216,000360,000=$0.60

Working note 9:

Compute the cost per equivalent unit:

Costperequivalentunit=CurrentperiodcostsTotalunitsaccountedfor=$113,400315,000=$0.36

Working note 10:

Compute the current costs added to complete beginning work-in-process inventory:

Labor=Costperequivalentunit×Beginninginventory=$0.60×30,000=$18,000

Working note 11:

Compute the current costs added to complete beginning work-in-process inventory:

Manufacturingoverhead=Costperequivalentunit×Beginninginventory=$0.36×37,500=$13,500

Working note 12:

Compute the current costs of units started and completed:

Priordepartment=Costperequivalentunit×Unitsstartedandcompleted=$2.56×225,000=$576,000

Working note 13:

Compute the current costs of units started and completed:

Materials=Costperequivalentunit×Unitsstartedandcompleted=$1.60×225,000=$360,000

Working note 14:

Compute the current costs of units started and completed:

Labor=Costperequivalentunit×Unitsstartedandcompleted=$0.60×225,000=$135,000

Working note 15:

Compute the current costs of units started and completed:

Manufacturingoverhead=Costperequivalentunit×Unitsstartedandcompleted=$0.36×225,000=$81,000

Working note 16:

Compute the current costs of units started and completed:

Priordepartment=Costperequivalentunit×Unitsinendinginventory=$2.56×150,000=$384,000

Working note 17:

Compute the current costs of units started and completed:

Materials=Costperequivalentunit×Unitsinendinginventory=$1.60×135,000=$216,000

Working note 18:

Compute the current costs of units started and completed:

Labor=Costperequivalentunit×Unitsinendinginventory=$0.60×105,000=$63,000

Working note 19:

Compute the current costs of units started and completed:

Priordepartment=Costperequivalentunit×Unitsinendinginventory=$0.36×52,500=$18,900

b.

To determine

Determine whether the targets assigned by the management have been achieved or not. Write a short report on the same.

b.

Expert Solution
Check Mark

Explanation of Solution

Computed cost per equivalent units:

ParticularsCost per equivalent unit
Materials$ 1.60
Labor$ 0.60
Manufacturing overhead$ 0.36

Table: (4)

Targeted cost per equivalent units:

ParticularsCost per equivalent unit
Materials$ 1.60
Labor$ 0.80
Manufacturing overhead$ 0.36

Table: (5)

Relevance of reported computed result and targeted result for materials, labor and manufacturing overhead:

The target determined by the management for materials and manufacturing overhead have been achieved. Only for labor the cost per equivalent unit has not achieved. The targeted cost per equivalent unit for labor was $0.80 but the actual cost per equivalent unit has been computed to $0.60. Thus, the target has been achieved and reduced further when computed using FIFO method for the computation.

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Required information Skip to question   [The following information applies to the questions displayed below.]Brianna's Boutique has the following transactions related to its top-selling Gucci purse for the month of October. Brianna's Boutique uses a periodic inventory system.  Date Transactions Units Unit Cost Total Cost October 1 Beginning inventory 6 $830 $4,980 October 4 Sale 4     October 10 Purchase 5 840 4,200 October 13 Sale 3     October 20 Purchase 4 850 3,400 October 28 Sale 7     October 30 Purchase 6 860 5,160         $17,740   2. Using FIFO, calculate ending inventory and cost of goods sold at October 31.

Chapter 8 Solutions

FUNDAMENTALS OF COST ACCOUNTING

Ch. 8 - We have discussed two methods for process costing,...Ch. 8 - A friend owns and operates a consulting firm that...Ch. 8 - The controller of a local firm that uses a...Ch. 8 - Throughout the chapter, we treated conversion...Ch. 8 - Consider a manufacturing firm with multiple...Ch. 8 - Prob. 16CADQCh. 8 - Would process costing work well for a service...Ch. 8 - Compute Equivalent Units: Weighted-Average Method...Ch. 8 - Compute Equivalent Units: FIFO Method Refer to the...Ch. 8 - Compute Equivalent Units: Weighted-Average Method...Ch. 8 - Compute Equivalent Units: FIFO Method Refer to the...Ch. 8 - Compute Equivalent Units Magic Company adds...Ch. 8 - Equivalent Units: Weighted-Average Process Costing...Ch. 8 - Prob. 24ECh. 8 - Prob. 25ECh. 8 - Compute Equivalent Units: Ethical Issues Aaron...Ch. 8 - Equivalent Units and Cost of Production By...Ch. 8 - Compute Costs per Equivalent Unit:...Ch. 8 - Compute the cost per equivalent unit for materials...Ch. 8 - Compute Equivalent Units: FIFO Method Materials...Ch. 8 - Compute Equivalent Units and Cost per Equivalent...Ch. 8 - Cost Per Equivalent Unit: Weighted-Average Method...Ch. 8 - Compute Costs per Equivalent Unit:...Ch. 8 - Refer to the data in Exercise 8–33. Compute the...Ch. 8 - Using the data in Exercise 8-33, compute the cost...Ch. 8 - Refer to the data in Exercises 8-33 and 8-35....Ch. 8 - Compute Costs per Equivalent Unit:...Ch. 8 - Refer to the data in Exercise 8-37. Compute the...Ch. 8 - Refer to the data in Exercise 8-37. Compute the...Ch. 8 - Prob. 40ECh. 8 - Prepare a Production Cost Report: FIFO Method...Ch. 8 - Prob. 42ECh. 8 - Prepare a Production Cost Report: Weighted-Average...Ch. 8 - Prob. 44ECh. 8 - Cost of Production: Weighted-Average and FIFO...Ch. 8 - Operation Costing: Ethical Issues Brokia...Ch. 8 - Prob. 47ECh. 8 - Prob. 48ECh. 8 - Prob. 49ECh. 8 - Suppose the marketing manager’s suggestion is...Ch. 8 - Prob. 51PCh. 8 - Prob. 52PCh. 8 - Prob. 53PCh. 8 - Prob. 54PCh. 8 - Prepare a production cost report for June for the...Ch. 8 - Prob. 56PCh. 8 - Prob. 57PCh. 8 - Prob. 58PCh. 8 - Prob. 59PCh. 8 - Prob. 60PCh. 8 - Prob. 61PCh. 8 - Prob. 62PCh. 8 - Prob. 63PCh. 8 - Prob. 64PCh. 8 - Prob. 65PCh. 8 - Prob. 66PCh. 8 - Prob. 67PCh. 8 - Process Costing and Ethics: Increasing Production...
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