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Washington Solution 1 of 2
FIFO Method Step 1: Step 2: Equivalent units
Units Flow of production Summarize Transferred Direct Conversion Physical Units in costs Materials Costs Completed and transferred out during current period l5 From beginning inventory 10% 800 800 7 2 0 l6 Started and completed 300 300 300 300 l7 Work in process, ending 20% 900 900 180 Accounted for 2, l8 Work done in current period only 1,200 1,100 1,
Transferred Direct Conversion Costs Totals in costs Materials Costs (Step 3) Costs added during current period $83,400 $21,600 $33,000 $28,
Divide by equivalent units in l8 ÷ 1,200 1,100 1,
l9 (Step 4) Equivalent unit costs $72.00 ‹ $18.00 $30.00 $24.
(Step 5) Assignment of costs Completed and transferred out Work in process beginning $17,600 given l5 0 800 7 2 0
l9 × $18.00 $30.00 $24.
[l5xl9] Costs added during current period $41,280 ‹ $0 $24,000 $17, Total for beginning inventory $58,
[l6xl9] Started and completed $21,600 ‹ 300 × $72.
Total costs transferred out $80, l7 900 180 l9 $18.00 $24. [l7xl9] Work in process, ending $20,520 ‹ $16,200 $4, Total costs to account for $101,
Washington Solution 2 of 2
Weighted-average method Step 1: Step 2: Equivalent units Flow of production Summarize Transferred Direct Conversion Units Physical Units in costs Materials Costs Beginning work in process 10% 800 Started during current period 1, To account for 2, l1 Total Completed and transferred out 1,100 1,100 1,100 1, l2 Work in process, ending 20% 900 900 180 Accounted for 2, l3 Work done to date 2,000 1,100 1,
Transferred Direct Conversion Costs Totals in costs Materials Costs Work in process beginning $17,600 $16,000 $1, Costs added during current period $83,400 $21,600 $33,000 $28, (Step 3) Total costs to account for $101,000 $37,600 $33,000 $30,
Divide by equivalent units in l3 ÷ 2,000 1,100 1,
l4 (Step 4) Equivalent unit costs $72.55 ‹ $18.80 $30.00 $23.
(Step 5) Application of costs
[l1xl4] Completed and transferred out $79,805 ‹ 1,100 × $72.
[l2xl4] Work in process, ending 900 180
× $18.80 $23.
Total costs to account for $101,
What is happening to costs? Transferred Direct Conversion Totals in costs Materials Costs l8 Equivalent units 1,200 1,100 1, l9 FIFO Unit costs this period $72.00 $18.00 $30.00 $24.
l3 Equivalent units 2,000 1,100 1, l4 W-A Unit costs this and last period $72.55 $18.80 $30.00 $23.
Comparing the unit costs in the table above, as average unit costs are greater than costs this period we can say that last period unit costs must have been higher.
Unit costs are decreasing and if unit costs are decreasing, FIFO Ending inventory < WA Ending inventory FIFO W average $20,520 $21, But hold it: Are costs actually decreasing? From the beginning work in process: Costs: Work in process beginning $16,000 $1, Equivalent units 800 80 Unit costs last period $70.00 $20.00 $30.00 $20.
So total unit costs are actually increasing What is happening? The perils of average costing
Inventory value
