[nickc1028]

Let me ask you guys how you would solve this question.

If this was me going by waht becker taught me. I would take the 10,000 of BI subtract it from the 50,000 units completed but add in the % of BI that was completed in the period. The add in the % of EI completed.

So (10,000)

+ 4,000

50,000

800

Total 44,800

Then take the current DL costs of 320,000 and divide it by 44800 and get 7.14

Any able to shed some light on this question?

The Lynch Company started the current year with 10,000 units in process that were 60 percent complete as to direct labor costs. As to direct labor, these units had a cost at that time of $45,000. During the year, another 50,000 units were started and direct labor cost for the period was $320,000. At the end of the year, the company had 4,000 units still in process which were 20 percent complete as to direct labor. If the company uses a FIFO system, what is the cost of a unit this year as to direct labor costs?

A $5.63

B $6.30 (correct choice)

C $6.40

D $6.43

In a FIFO system, the cost per unit is the cost expended this period divided by the number of equivalent units created during the period. The current cost for direct labor is $320,000. The number of equivalent units starts with the number of units completed. Here, since no units are mentioned as being lost, that number must have been 56,000 (10,000 beginning plus 50,000 started less 4,000 ending working in process). Total direct labor done is 56,000 completed units plus 800 units still in ending working in process (4,000 units that are 20 percent complete) or a total of 56,800 units of work. To get the work done just in this current period (which is used by FIFO), the amount of work in beginning work in process is subtracted. That is 10,000 units times 60 percent completion or 6,000 units done last year. The amount of work done this period is 56,800 total minus 6,000 done last year to arrive at 50,800 units of work done this period. The cost per unit using FIFO is $320,000/50,800 or $6.30.

CPA
AUD - 7/26/11 - pass
BEC - 8/31/11 - pass
FAR - 10/14/11 - pass
REG - 11/26/11 - pass
CMA
2/27/15 - pass
5/9/15 - pass

[nickc1028]

lots of views! no one wants to take a crack at it?

CPA
AUD - 7/26/11 - pass
BEC - 8/31/11 - pass
FAR - 10/14/11 - pass
REG - 11/26/11 - pass
CMA
2/27/15 - pass
5/9/15 - pass

[jmd09]

Looks like what your doing wrong is using the 50,000 as opposed to using the 56,000 when you add up for the inventory. In other words, it should be 4 + 56 – 10 + .8 = 50,800. The question said that they had started but not completed 50,000, which means you need to figure out the amount that was transferred by doing 10 (beg) + 50 (started) – 4 (ending) –> 56,000.

REG 90
AUD 85
BEC 92
FAR 84

[jmd09]

Heres a somewhat related question I have, hopefully someone can figure it out.

Littlepup Company produces toy dogs that are sold throughout the United States. Process cost accounting is being used. At the beginning of December, Year One, Littlepup has 30,000 toys in process that are 80 percent complete as to material but only 30 percent complete as to conversion costs (direct labor and factory overhead). During December, 100,000 more toy dogs are started with a total of 120,000 being completed prior to the end of the year. The remaining 10,000 units are 60 percent complete as to material and 10 percent complete as to conversion costs. The company’s accountants have computed the equivalent units of work for the month using both a weighted-average system and a first-in, first-out system. How many more units will be used in the weighted-average system?

A Material—24,000 units more; conversion costs—9,000 units more (*correct answer)

B Material—18,000 units more; conversion costs—8,000 units more

C Material—6,000 units more; conversion costs—21,000 units more

D Material—6,000 units more; conversion costs—1,000 units more

Explanation = A weighted average system determines the equivalent units of work done based on the total that has been accomplished by the end of the period. During December, 120,000 units were completed (120,000 units of material and 120,000 units of conversion costs). In addition, 10,000 units were partially complete (10,000 times 60 percent or 6,000 units of material and 10,000 times 10 percent or 1,000 units of conversion costs). So, the total in a weighted-average system is 126,000 units of material (120,000 plus 6,000) and 121,000 units of conversion costs (120,000 plus 1,000). A first-in, first-out approach makes one subtle distinction. It does not include any work done prior to December. Therefore, the amount of work on the beginning work in process is removed from the numbers computed above to leave only the work done during December. For material, 24,000 units were already in work-in-process at the start of the month (30,000 units 80 percent complete) so total equivalent units for December is 102,000 (126,000 total less 24,000 units of work in previous month). For conversion costs, 9,000 units were already in beginning work-in-process (30,000 units 30 percent complete) so total equivalent units for December is 112,000 (121,000 total less 9,000 in previous month). It is the handling of the beginning work in process (24,000 and 9,000 equivalent units) that makes the difference.

Following Becker's formulas for equivalent units I had no problem calculating the equivalent units under weighted average, however I dont fully understand why it isn't working when I use FIFO:

Weighted Avg equivalent units = 126 (for materials) and 121 (for conversion costs)

FIFO (per Becker):

Materials = 6 (beg. inventory % left to complete) + 120 (units completed) – 24 (total beg. materials inv.) + 6 (% completed of ending inventory) –> 108

126 – 108 = difference of 18

Conversion Costs = 21 (beg % to complete) + 120 (units complete) – 9 (total CCs in beg inventory) + 1 (% completed of ending inventory –> 113

133 – 121 = difference of 12

I guess my main question is it correct to subtract the entire beg. inventory amount (30) as opposed to using the % (6 for materials and 21 for CC) complete of the specific area (materials vs. conversion costs) seeing as how the calculation uses the total for one part and portion for the other? Hopefully that makes sense

REG 90
AUD 85
BEC 92
FAR 84

[Author]

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