Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON

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Textbook Question
Chapter 17, Problem 17.38P

FIFO method (continuation of 17-36).

1. 1. Do Problem 17-36 using the FIFO method of process costing. Explain any difference between the cost per equivalent unit in the assembly department under the weighted-average method and the FIFO method.
2. 2. Should Hoffman’s managers choose the weighted-average method or the FIFO method? Explain briefly.

17-36 Weighted-average method. Hoffman Company manufactures car seats in its Boise plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Hoffman Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing.

Hoffman Company uses the weighted-average method of process costing. Data for the assembly department for October 2017 are as follows:

a Degree of completion: direct materials, ?%; conversion costs, 45%.

b Degree of completion: direct materials, ?%; conversion costs, 65%.

1. 1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule.

Required

1. 2. What issues should the manager focus on when reviewing the equivalent-unit calculations?
2. 3. For each cost category, summarize total assembly department costs for October 2017 and calculate the cost per equivalent unit.
3. 4. Assign costs to units completed and transferred out and to units in ending work in process.
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