Dickerson Company uses a process costing system. The following information relates to one month's activity in the company's Mixing Department. Units Conversion Percent CompleteBeginning work-in-process inventory 10,000 20%Units started 21,000 Units completed and transferred out 26,000 Ending work-in-process inventory 5,000 80%The conversion cost of the beginning inventory was $6,500. During the month, $112,000 in additional conversion cost was incurred.Required:a. Assume that the company uses the FIFO method. Compute:1. The equivalent units of production for conversion for the month.2. The cost per equivalent unit for conversion for the month.3. The total cost transferred out during the month.4. The cost assigned to the ending work-in-process inventory.b.
Assume that the company uses the weighted-average cost method. Compute:1. The equivalent units of production for conversion for the month.2. The cost per equivalent unit for conversion for the month.3. The total cost transferred out during the month.4. The cost assigned to the ending work-in-process inventory.
What will be an ideal response?
a. FIFO method:
1.
| To complete beginning WIP [10,000 × (100% ? 20%)] | 8,000 | ||
| Units started and completed (26,000 ? 10,000) | 16,000 | ||
| Ending WIP (5,000 × 80%) | 4,000 | ||
| Equivalent units of production | 28,000 | ||
3.
| Beginning inventory: | |||
| Cost in the beginning inventory | $ | 6,500 | |
| Completion of the units in the beginning inventory: $4 × (10,000 × 80%) | 32,000 | ||
| Units started and completed during the period: $4 × 16,000 units | 64,000 | ||
| Total cost transferred out | $ | 102,500 | |
b. Weighted-average method:
1.
| Units transferred out | 26,000 | ||
| Add: equivalent units in the ending inventory 5,000 × 80% | 4,000 | ||
| Equivalent units of production | 30,000 | ||
| Cost in the beginning inventory | $ | 6,500 | |
| Cost incurred during the period | 112,000 | ||
| Total cost | $ | 118,500 | |
| Equivalent units of production | 30,000 | ||
| Cost per equivalent unit | $ | 3.95 | |
4. (5,000 × 80%) × $3.95 per EU = $15,800.
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