Because of the availability of equipment and labor, Clear View has started making mass market picture frames at its Orlando, Florida plant with the excess capacity. Clear View has determined that process costing would be most appropriate for this product. Management wants to know the differences between using the Weighted Average and FIFO methods
Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at Clear View has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added when the assembly department process is 10% complete. Conversion costs are added evenly during the assembly department's process.
Consider the following data for the assembly department in April 2014:
|
|
Physical Unit
(Frames)
|
Direct
Materials
|
Conversion
Costs
|
|
Work in process, April 1a
|
60
|
$1.530
|
$156
|
|
Started during April 2014
|
510
|
|
|
|
Completed during April 2014
|
450
|
|
|
|
Work in process, April 30°
|
120
|
|
|
|
Total costs added during April 2014
|
|
$11.850
|
$11.544
|
a Degree of completion: direct materials, 100%; conversion costs, 40%.
b Degree of completion: direct materials, 100%; conversion costs, 15%.
1. Summarize the total assembly department costs for April 2014, and assign them to units completed (and transferred out) and to units in ending work in process using the weighted average method.
2. What issues should a manager focus on when reviewing the equivalent units calculation?
3. Summarize the total assembly department costs for April 2014, and assign them to units completed (and transferred out) and to units in ending work in process using the FIFO method.
4. Explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the assembly department under the weighted-average method and the FIFO method. Should Clear View's managers choose the weighted-average method or the FIFO method? Explain briefly.
Attachment:- project template.xlsx