Weighted-average method, assigning costs.

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Weighted-average method, assigning costs. Tomlinson Corporation is a biotech company based in Milpitas. It makes a cancer-treatment drug in a single processing department. Direct materials are added ... at the start of the process. Conversion costs are added evenly during the process. Tomlinson uses the weighted-average method of process costing. The following information for July 2014 is available. a degree of completion: direct materials, 100%; conversion costs, 25%. bDegree of completion: direct materials, 100%; conversion costs, 70%. Required: 1. Calculate the cost per equivalent unit for direct materials and conversion costs. 2. Summarize the total costs to account for, and assign them to units completed (and transferred out) and to units in the ending work in process. SOLUTION 1. & 2. Solution Exhibit 17-24A shows equivalent units of work done to date for Tomlinson Corporation for direct materials and conversion costs. Solution Exhibit 17-24B summarizes total costs to account for, calculates the cost per equivalent unit of work done to date for direct materials and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work-in-process inventory. 17-5SOLUTION EXHIBIT 17-24A Summarize the Flow of Physical Units and Compute Output in Equivalent Units; WeightedAverage Method of Process Costing, Tomlinson Corporation for July 2014. (Step 2) (Step 1) Equivalent Units Physical Direct Conversion The flow of Production Units Materials Costs Work in process, beginning (given) 8,700 Started during current period (given) 34,500 To account for 43,200 Completed and transferred out during current period 32,000 32,000 32,000 Work in process, ending* (given) 11,200 11,200  100%; 11,200  70% 11,200 7,840 Accounted for 43,200 Equivalent units of work done to date 43,200 39,840 *Degree of completion: direct materials, 100%; conversion costs, 70%. SOLUTION EXHIBIT 17-24B Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed and Units in Ending Work-in-Process Inventory; WeightedAverage Method of Process Costing for Tomlinson Corporation for July 2014. Total Production Costs Direct Materials Conversion Costs (Step 3) Work in process, beginning (given) $104,700 $ 61,500 $ 43,200 Costs added in current period (given) 800,004 301,380 498,624 Total costs to account for $904,704 $362,880 $541,824 (Step 4) Costs incurred to date $362,880 $541,824 Divide by equivalent units of work done to date (Solution Exhibit 17-24A)   43,200   39,840 Cost per equivalent unit of work done to date $ 8.40 $ 13.60 (Step 5) Assignment of costs: Completed and transferred out (32,000 units) $704,000 (32,000*  $8.40) + (32,000*  $13.60) Work in process, ending (11,200 units) 200,704 (11,200†   $8.40) + (7,840†   $13.60) Total costs accounted for $904,704 $362,880 + $541,824 *Equivalent units completed and transferred out (given). †Equivalent units in ending work in process (given). 17-25 (30 min.) FIFO method, assigning costs. Required: 1. Do Exercise 17-24 using the FIFO method. 2. Tomlinson’s management seeks to have a more consistent cost per equivalent unit. Which method of process costing should the company choose and why? 17-5SOLUTION 1. Solution Exhibit 17-25A calculates the equivalent units of work done in the current period. Solution Exhibit 17-25B summarizes total costs to account for, calculates the cost per equivalent unit of work done in the current period for direct materials and conversion costs, and assigns these costs to units completed and transferred out and to units in ending work-in-process inventory. SOLUTION EXHIBIT 17-25A Summarize the Flow of Physical Units and Compute Output in Equivalent Units; FIFO Method of Process Costing, Tomlinson Corporation for July 2014. (Step 1) (Step 2) Equivalent Units Flow of Production Physical Units Direct Materials Conversion Costs Work in process, beginning (given) Started during the current period (given) To account for 8,700 34,500 43,200 (work done before current period) Completed and transferred out during the current period: From beginning work in process§ 8,700  (100%  100%); 8,700  (100% – 25%) 8,700 0 6,525 Started and completed 23,300  100%, 23,300  100% 23,300† 23,300 23,300 Work in process, ending* (given) 11,200  100%; 11,200  70% 11,200 11,200 7,840 Accounted for 43,200 Equivalent units of work done in the current period 34,500 37,665 §Degree of completion in this department: direct materials, 100%; conversion costs, 25%. †32,000 physical units completed and transferred out minus 8,700 physical units completed and transferred out from beginning work-in-process inventory. *Degree of completion in this department: direct materials, 100%; conversion costs, 70% [Show More]

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