Because of the availability of equipment and labor Clear Vie

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:

Degree of completion: direct materials, 100%; conversion costs, 40%.

Degree of completion: direct materials, 100%; conversion costs, 15%.

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.

What issues should a manager focus on when reviewing the equivalent units calculation?

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.

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.

Project Part II Section 2
FIFO Method
		Equivalent Units
	Physical	Direct	Conversion
Flow of Production	Units	Materials	Costs
Work in process, beginning
Started during current period
To account for
Completed and transferred out
Started and Completed
Work in process, ending
Accounted for
Equivalent units of work done to date
	Total
	Production	Direct	Conversion
	Costs	Materials	Costs
Work in process, beginning
Costs added in current period
Total costs to account for
Costs added in current period
Equivalent Units from row 65
Cost per Equivalent Unit
Assignment of costs:
Completed and transferred out :
WIP Beginning Inventory
Costs added to Beginning WIP
Total from Beginning Inventory
Started and Completed
Total WIP and Transferred Out
Work in process, ending
Total costs accounted for
The following table summarizes the costs assigned to units completed and those still in process under the weighted-average and FIFO process-costing methods
	Weighted Average	FIFO	Difference
Cost of units completed and transferred out
Work in process, ending
Total costs accounted for
Explain differences

Solution

FIFO method Beggining units 60 Transferred out 450 Started into production 510 Ending units 120 570 570 Equivalent units Material Conversion Beginning units 60 60 Completion in current period 0% 60% A 0 36 Units started and completed 390 390 Completion 100% 100% B 390 390 Ending Units 120 120 Completion 100% 15% C 120 18 Total units A+B+C 510 444 Per unit cost Cost Total units Per unit cost Material cost 17850 510 35.00 Conversion cost 11544 444 26.00 29394 61.00 Cost of goods sold Material convertion cost Beginning inventory completed Completion 0% 60% Per unit cost 35.00 26.00 Units 60 60 Total cost   A 0.00 936 936 Units started and completed Completion 100% 100% Per unit cost 35.00 26.00 Units 390 390 Total cost    B 13650 10140 23790 Beginning work in progress C 1530 156 1686 Total cost A+B+C 26412 Ending work in progress Completion 100% 15% Per unit cost 35.00 26.00 Units 120 120 Total cost     4200 468 4668 Total cost accounted for 31080 Weighted average cost Beggining units 60 Transferred out 450 Started intro production 510 Ending units 120 Units accounted for 570 570 Equivalent units Material Conversion cost Units transferred                      A 450 450 Ending Units 120 120 Completion 100% 15% B 120 18 Total units 570 468 Cost per equivalent units Particulars Material Conversion cost total As at beginning 1530 156 1686 Added during the month 17850 11544 29394 Cost to be accounted for 19380 11700 31080 Total eqivalent units 570 468 Cost per equivalent unit 34.00 25.00 59.00 Cost per equivalent unit = Cost to be accounted for / Total equivalent units Cost of ending work in progress Conversion cost Particulars Material Total Ending units 120 120 Cost per equivalent units 34.00 25.00 Completion 100% 15% Total cost 4080 450 4530 Cost of goods transferred Conversion cost Particulars Material Total Number of units 450 450 Cost per equivalent units 34.00 25.00 59.00 Total amount 15300 11250 26550