Solution manual introduction managerial accounting 5e by garrison chapter 04 supplement

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Chapter 4 Supplement
Process Costing Using the FIFO Method
Solutions to Questions
4S-1 Under the FIFO method, the equivalent
units of production include only the work of the
current period. The equivalent units of production in the beginning inventory are excluded. In
contrast, under the weighted-average method,
the equivalent units of production include the
equivalent units that were in beginning inventory as well as the equivalent units due to work
in the current period.
4S-2 Under the FIFO method, units transferred out are divided into two groups. The first
group consists of units from the beginning work
in process inventory. The second group consists

of units started and completed during the period.
4S-3 The FIFO method is superior to the
weighted-average method from the standpoint
of cost control because current performance
should be measured in relation to costs of the
current period only, and the weighted-average
method mixes the costs of the current period
with costs of the prior period. Thus, under the
weighted-average method, the manager’s performance is influenced to some extent by what
happened in the prior period.

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Brief Exercise 4S-1 (10 minutes)
FIFO Method
To complete beginning work in process:
Materials: 30,000 units × (100% − 65%) .........
Conversion: 30,000 units × (100% − 30%) ......
Units started and completed during October* ......
Ending work in process:
Materials: 15,000 units × 80% complete ..........
Conversion: 15,000 units × 40% complete .......
Equivalent units of production ............................

Materials Conversion
10,500
160,000
12,000
182,500

21,000
160,000
6,000
187,000

* 175,000 units started – 15,000 units in ending work in process
= 160,000 units started and completed

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Brief Exercise 4S-2 (10 minutes)
FIFO method
Cost added during May (a)................
Equivalent units of production (b) .....
Cost per equivalent unit (a) ÷ (b)......
Cost per equivalent unit for materials
Cost per equivalent unit for labor ......
Cost per equivalent unit for overhead
Total cost per equivalent unit ............

Materials

Labor

Overhead

$193,320 $62,000 $310,000
27,000 25,000
25,000
$7.16
$2.48
$12.40
$ 7.16

2.48
12.40
$22.04

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Brief Exercise 4S-3 (15 minutes)

Materials Conversion

Ending work in process inventory:

Equivalent units of production ...............
Cost per equivalent unit ........................
Cost of ending work in process inventory

Units transferred out:

Cost in beginning inventory ...................

400
$2.32
$928

200
$0.75
$150

$1,078

$3,200

$650

$3,850

600
$2.32

1,200
$0.75

$1,392

$900

24,000
$2.32

24,000
$0.75

Cost to complete the units in beginning inventory:
Equivalent units of production required

to complete the beginning inventory
Cost per equivalent unit ......................
Cost to complete the units in beginning
inventory .......................................

Cost of units started and completed this period:
Units started and completed this period
(26,000 units completed and
transferred to the next department
– 2,000 units in beginning work in
process inventory) ..........................
Cost per equivalent unit ......................
Cost of units started and completed
this period .....................................
Total cost of units transferred out ..........

Total

$55,680

$2,292

$18,000 $73,680
$79,822

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Exercise 4S-4 (10 minutes)
Mixing Department
Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory .
Costs added to production during the period .
Total cost to be accounted for ......................

$ 1,460
36,540
$38,000

Costs accounted for as follows:
Cost of ending work in process inventory ......
Cost of units completed and transferred out..
Total cost accounted for...............................

$ 3,120
34,880 *
$38,000

*The cost of units completed and transferred out can be deduced as
follows:
Cost of beginning
Costs added
Cost of ending
Cost of units

work in process + to production = work in process + completed and
inventory
during the period
inventory
transferred out
Cost of units
$1,460 + $36,540 = $3,120 + completed and
transferred out
Cost of units
completed and = $1,460 + $36,540 - $3,120
transferred out
Cost of units
completed and = $34,880
transferred out

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Exercise 4S-5 (10 minutes)
To complete beginning work in process:
Materials: 500 units x (100% – 80%) .................
Conversion: 500 units x (100% – 40%) ..............
Units started and completed during the period
(153,600 units started – 400 units in ending
inventory) .........................................................

Ending work in process
Materials: 400 units x 75% complete ..................
Conversion: 400 units x 20% complete ...............
Equivalent units of production ................................

Materials Conversion
100

153,200
300
153,600

300
153,200
80
153,580

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Exercise 4S-6 (20 minutes)
FIFO Method
1.

To complete beginning work in process:

Materials: 5,000 units ×
(100% − 80%) ..............................
Labor: 5,000 units ×
(100% − 60%) ..............................
Overhead: 5,000 units ×
(100% − 60%) ..............................
Units started and completed during the
period* .............................................
Ending work in process:
Materials: 8,000 units × 75%.............
Labor: 8,000 units × 50% .................
Overhead: 8,000 units × 50% ...........
Equivalent units of production ..............

Materials

Labor

Overhead

1,000
2,000
2,000
37,000
6,000
44,000

37,000
4,000
43,000

37,000

4,000
43,000

* 45,000 units started into production – 8,000 units in ending work
in process = 37,000 started and completed
2.
Cost added during the period (a) ..........
Equivalent units of production (b) .........
Cost per equivalent unit (a) ÷ (b) .........

Materials

Labor

$52,800 $21,500
44,000 43,000
$1.20
$0.50

Overhead

$32,250
43,000
$0.75

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Exercise 4S-7 (15 minutes)
FIFO Method
1.

Work in process, June 1 ..........................................
Started into production during the month .................
Total tons in process ...............................................
Deduct work in process, June 30 ..............................
Completed and transferred out during the month ......

2.
To complete beginning work in process:
Materials: 20,000 tons × (100% − 90%)
Labor and overhead: 20,000 tons ×
(100% − 80%) ...................................
Units started and completed during the
month* .................................................
Ending work in process:
Materials: 30,000 tons × 60% complete .
Labor and overhead:
30,000 tons × 40% complete ..............
Equivalent units of production...................

Tons of Pulp

20,000
190,000
210,000
30,000
180,000

Equivalent Units
Labor and
Materials Overhead
2,000
4,000
160,000

160,000

18,000
180,000

12,000
176,000

* 190,000 tons started into production – 30,000 tons in ending
work in process = 160,000 tons started and completed

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Exercise 4S-8 (45 minutes)
FIFO Method
1. Computation of the total cost per equivalent unit of production:
Cost per equivalent unit of production for material .............
Cost per equivalent unit of production for conversion .........
Total cost per equivalent unit of production .......................

$25.40
18.20
$43.60

2. Computation of equivalent units in ending inventory:
Units in ending inventory (a) ...................
Percentage completed (b) .......................
Equivalent units of production (a) × (b) ...

Materials
300
70 %
210

Conversion
300
60 %
180

3. Computation of equivalent units required to complete the beginning
inventory:

Units in ending inventory (a) ...................
Percentage completed (b) .......................
Equivalent units of production (a) × (b) ...

Materials
400
20 %
80

4. Units transferred to the next department ............
Units from the beginning inventory.....................
Units started and completed during the period ....

Conversion
400
60 %
240

3,100
400
2,700

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Exercise 4S-8 (continued)
5.

Materials Conversion

Ending work in process inventory:
Equivalent units of production ...................................................
210
180
Cost per equivalent unit ............................................................
$25.40
$18.20
Cost of ending work in process
inventory ..............................................................................
$5,334
$3,276

Total

$8,610

Units transferred out:
Cost from the beginning work in
process inventory ..................................................................
$8,120
$2,920 $11,040
Cost to complete the units in beginning
work in process inventory:
Equivalent units of production
required to complete the units in

beginning inventory ..........................................................
80
240
Cost per equivalent unit .......................................................
$25.40
$18.20
Cost to complete the units in
beginning inventory ..........................................................
$2,032
$4,368
$6,400
Cost of units started and completed
this period:
Units started and completed this
period ..............................................................................
2,700
2,700
Cost per equivalent unit .......................................................
$25.40
$18.20
Cost of units started and completed
this period ........................................................................
$68,580
$49,140 $117,720
Total cost of units transferred out .............................................$135,160

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Exercise 4S-9 (15 minutes)
FIFO Method

Labor &
Materials Overhead

To complete the beginning work in process:
Materials: 20,000 pounds × (100% − 100%)........
0
Labor and overhead:
20,000 pounds × (100% − 30%) ......................
Pounds started and completed during July* ............. 355,000
Ending work in process:
Materials: 25,000 pounds × 100% complete ......... 25,000
Labor and overhead:
25,000 pounds × 60% complete........................
Equivalent units of production ................................ 380,000

14,000
355,000

15,000
384,000

* 380,000 pounds started – 25,000 pounds in ending work in process
inventory = 355,000 pounds started and completed this month

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Problem 4S-10A (45 minutes)
FIFO method
1. Equivalent Units of Production
To complete beginning work in process:
Materials: 20,000 units x (100% − 100%) .....
Conversion: 20,000 units x (100% − 75%) ....
Units started and completed during the period
(180,000 units started − 40,000 units in
ending inventory) ..........................................
Ending work in process:
Materials: 40,000 units x 100% complete ......
Conversion: 40,000 units x 25% complete .....
Equivalent units of production ...........................
2. Cost per Equivalent Unit
Cost added during the period (a) ..............
Equivalent units of production (b) .............
Cost per equivalent unit (a) ÷ (b) .............

Materials Conversion
0

140,000
40,000
180,000

5,000
140,000
10,000
155,000

Materials Conversion
$334,800
180,000
$1.86

$238,700
155,000
$1.54

3. See the next page.
4. Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($25,200 + $24,800)..........................................
Costs added to production during the period
($334,800 + $238,700) ......................................
Total cost to be accounted for ................................
Costs accounted for as follows:
Cost of ending work in process inventory ................
Costs of units transferred out .................................
Total cost accounted for ........................................

$ 50,000
573,500
$623,500
$ 89,800
533,700
$623,500

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Problem 4S-10A (continued)
3. Costs of Ending Work in Process Inventory and Units Transferred Out
Ending work in process inventory:
Equivalent units of production .................................................
Cost per equivalent unit ..........................................................
Cost of ending work in process inventory .................................

Materials Conversion
40,000
$1.86
$74,400

Units transferred out:
Cost in beginning work in process inventory ............................ $25,200

Cost to complete the units in beginning work in process inventory:
Equivalent units of production required to complete the
beginning inventory ........................................................
0
Cost per equivalent unit .....................................................
$1.86
Cost to complete the units in beginning inventory ................
$0
Cost of units started and completed this period:
Units started and completed this period .............................. 140,000
Cost per equivalent unit .....................................................
$1.86
Cost of units started and completed this period ................... $260,400
Cost of units transferred out ...................................................

Total

10,000
$1.54
$15,400

$89,800

$24,800

$50,000

5,000
$1.54
$7,700

$7,700

140,000
$1.54
$215,600 $476,000
$533,700

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Problem 4S-11A (45 minutes)
FIFO method
1. Equivalent Units of Production
To complete beginning work in process:
Materials: 10,000 units x (100% − 100%) .....
Conversion: 10,000 units x (100% − 30%) ....
Units started and completed during the period
(170,000 units started − 20,000 units in
ending inventory) ..........................................
Ending work in process:
Materials: 20,000 units x 100% complete ......
Conversion: 20,000 units x 40% complete .....
Equivalent units of production ...........................
2. Cost per Equivalent Unit

Cost added during the period (a) ..............
Equivalent units of production (b) .............
Cost per equivalent unit (a) ÷ (b) .............

Materials Conversion
0

150,000
20,000
170,000

7,000
150,000
8,000
165,000

Materials Conversion
$139,400
170,000
$0.82

$244,200
165,000
$1.48

3. See the next page.
4. Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($8,500 + $4,900) .............................................

Costs added to production during the period
($139,400 + $244,200) ......................................
Total cost to be accounted for ................................
Costs accounted for as follows:
Cost of ending work in process inventory ................
Costs of units transferred out .................................
Total cost accounted for ........................................

$ 13,400
383,600
$397,000
$ 28,240
368,760
$397,000

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Problem 4S-11A (continued)
3. Costs of Ending Work in Process Inventory and Units Transferred Out
Ending work in process inventory:
Equivalent units of production .................................................
Cost per equivalent unit ..........................................................
Cost of ending work in process inventory .................................

Materials Conversion
20,000
$0.82
$16,400

Units transferred out:
Cost in beginning work in process inventory ............................
$8,500
Cost to complete the units in beginning work in process inventory:
Equivalent units of production required to complete the
beginning inventory ........................................................
0
Cost per equivalent unit .....................................................
$0.82
Cost to complete the units in beginning inventory ................
$0
Cost of units started and completed this period:
Units started and completed this period .............................. 150,000
Cost per equivalent unit .....................................................
$0.82
Cost of units started and completed this period ................... $123,000
Cost of units transferred out ...................................................

Total

8,000
$1.48
$11,840

$28,240

$4,900

$13,400

7,000
$1.48
$10,360

$10,360

150,000
$1.48
$222,000 $345,000
$368,760

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Analytical Thinking (60 minutes)
1.
To complete beginning work in process:
Transferred in: 450 units × (100% − 100%)..................
Materials: 450 units × (100% − 100%) .........................
Conversion: 450 units × (100% − 60%)........................

Units started and completed during the period (1,950 units
started − 600 units in ending inventory) .........................
Ending work in process:
Transferred in: 600 units x 100% complete
Materials: 600 units x 0% complete ..............................
Conversion: 600 units x 35% complete ..........................
Equivalent units of production ...........................................
Cost added during the period (a) .......................................
Equivalent units of production (b) ......................................
Cost per equivalent unit (a) ÷ (b) ......................................

Transferred In
0

1,350
600
1,950

Transferred In
$17,940
1,950
$9.20

Materials Conversion
0
1,350
0
1,350

180

1,350

210
1,740

Materials Conversion
$6,210
1,350
$4.60

$13,920
1,740
$8.00

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Analytical Thinking (continued)
Ending work in process inventory:
Equivalent units of production ..........................
Cost per equivalent unit ...................................
Cost of ending work in process inventory ..........
Units transferred out:
Cost in beginning work in process inventory .....
Cost to complete units in beginning work in

process inventory:
Equivalent units of production required to
complete the beginning inventory (see
above) ....................................................
Cost per equivalent unit ..............................
Cost to complete units in beginning
inventory.................................................
Cost of units started and completed this period:
Units started and completed this period .......
Cost per equivalent unit ..............................
Cost of units started and completed this
period .....................................................
Cost of units transferred out ............................

Transferred In Materials Conversion

Total

600
$9.20
$5,520

0
$4.60
$0

210
$8.00
$1,680

$7,200

$4,068

$1,980

$2,160

$8,208

0
$9.20

0
$4.60

180
$8.00

$0

$0

$1,440

1,350
$9.20

1,350
$4.60

1,350
$8.00

$12,420

$6,210

$10,800

$1,440

$29,430
$39,078

2. The effects of the price increases will tend to show up more under the FIFO method. The reason is
that the FIFO method keeps the costs of the current period separate from the costs of prior periods.
Thus, under the FIFO method, management will be able to see the effect of price increases on unit
costs without any distorting influence from what has happened in the past.
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Analytical Thinking (continued)
Under the weighted-average method, however, costs carried over from the prior period are averaged
in with costs of the current period, which will tend to reduce somewhat the impact of increased

materials prices on current period unit costs.

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