Aaron Company has a process costing system. All materials are introduced when conversion costs reach 50 percent. The following information is available for physical units during March. Work in process, March 1 (60% complete as to conversion costs) 167,000 Units started in March 634,000 Units transferred to Finishing Department in March 664,000 Work in process, March 31 (40% complete as to conversion costs) 137,000 Required: a. Compute the equivalent units for materials costs and for conversion costs using the weighted-average method. b. Compute the equivalent units for materials costs and for conversion costs using the FIFO method. c. The company president has been under considerable pressure to increase income. He tells the controller to change the estimated completion for ending work in process to 60 percent (from 40 percent). c-1. What effect will this change have on the unit costs of units transferred to finished goods in March? c-2. Would this be ethical? c-3. Is this likely to be a successful strategy for affecting income over a long period of time?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Aaron Company has a
| Work in process, March 1 (60% complete as to conversion costs) | 167,000 | |
| Units started in March | 634,000 | |
| Units transferred to Finishing Department in March | 664,000 | |
| Work in process, March 31 (40% complete as to conversion costs) | 137,000 | |
Required:
a. Compute the equivalent units for materials costs and for conversion costs using the weighted-average method.
b. Compute the equivalent units for materials costs and for conversion costs using the FIFO method.
c. The company president has been under considerable pressure to increase income. He tells the controller to change the estimated completion for ending work in process to 60 percent (from 40 percent).
c-1. What effect will this change have on the unit costs of units transferred to finished goods in March?
c-2. Would this be ethical?
c-3. Is this likely to be a successful strategy for affecting income over a long period of time?
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