Question

COST (0 PUL Fielding Company manufactures car seats in its Hartford plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. (Click the icon to view information about Fielding Company's process-costing system.) Data for the assembly department for October 2017 are as follows: 2(Click the icon to view the assembly department data.) (Click the icon to view the weighted-average cost per equivalent unit data and total costs accounted for.) Read the requirements4. Requirement 1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule. (For amounts with a 0 balance, make sure to enter "0" in the appropriate cell.) Physical Units Equivalent Units Direct Conversion Materials Costs Flow of Production Work in process beginning Started during current period To account for Completed and transferred out during current period: From beginning work in process Started and completed only click Check Answer

Answer 1

1.

		Material	Conversion Costs
Units to account for
Beginning Work in process	5100
Units started	19500
Total Units to account for	24600
Units accounted for
Inventory in Process, Beginning	5100	0	2040
Started and completed	17400	17400	17400
Units transferred	22500	17400	19440
Equivalent units in ending WIP	2100	2100	1575
Total units accounted for	24600
Equivalent units of production		19500	21015

2.

	Material	Conversion Costs	Total
Inventory in Process, Beginning	$1,489,200	$      684,675	$ 2,173,875
Costs incurred	$4,095,000	$ 1,891,350	$ 5,986,350
Total Costs to be accounted for			$ 8,160,225

	Material	Conversion Costs
Cost added during the production	$4,095,000	$ 1,891,350
Equivalent units of production	19500	21015
Cost per Equivalent unit	$      210.00	$           90.00

3.

	Material	Conversion Costs	Total
Costs allocated
Inventory in Process, Beginning	$1,489,200	$      684,675	$ 2,173,875
To completed beginning inventory	$                -	$      183,600	$      183,600
Total Cost of Work in Process	$1,489,200	$      868,275	$ 2,357,475
Started and completed	$3,654,000	$ 1,566,000	$ 5,220,000
Completed and Transferred	$5,143,200	$ 2,434,275	$ 7,577,475
Inventory in Process, Ending	$    441,000	$      141,750	$      582,750
Total Costs accounted for			$ 8,160,225

4. The cost per equivalent unit differs between the two methods because each method uses different costs as the numerator of the calculation. FIFO method uses only the costs added during the current period, whereas weighted-average uses the costs from the beginning work-in-process as well as costs added during the current period. Both methods also use different equivalent units in the denominator

5.

	Weighted Average	FIFO	Difference
Cost of units completed and transferred	$   7,515,000	$ 7,577,475	$        62,475
Work in Process, ending	$       645,225	$      582,750	$      -62,475
Total costs accounted for	$   8,160,225	$ 8,160,225

Managers should consider the FIFO method because even though it shows lower operating income and higher cost of goods sold, it lowers taxes. Managers may have an incentive, however, to use the weighted-average method and show higher income if the managers’ compensation increases with higher operating income or if there are debt covenants that would be violated by showing lower income. Another advantage of the FIFO method is that it provides better information for managing the business because it keeps separate the costs of the current period from costs incurred in previous periods.