Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the Assembly Department and the Testing Department. This problem focuses on the Aseembly Department. The process-costing system at Larsen Company has a single direct-cost-category (direct materials) and a single indirect-cost cateory (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the Assembly Department finished work on each car seat, it is immediately transferred to Testing.
Physical Units Direct Materials Conv Costs
Work in process, Oct 1* 5,000 $1,250,000 $ 402,750
Started during Oct 2009 20,000
Completed during Oct 2009 22,500
Work in process, Oct 31** 2,500
Total costs added Oct 2009 $4,500,000 $2,337,500
*Degree of completion: direct materials, ?%; conversion costs, 60%.
**Degree of completion: direct materials, ?%; conversion costs, 70%.
1. For each cost category, compute equivalent units in the Assembly Department. Show physical units in the first column of your schedule.
2. For each cost category, summarize total Assembly Department costs for October 2009 and calculate the cost per equivalent unit.
3. Assign total costs to units completed and transferred out and to units in ending work in process.
Do the problem above 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.
The solution explains the calculation using weighted average and FIFO methods