Fairfax Company uses
weighted-average process costing to account for its production costs. Direct
labor is added evenly throughout the process.
P20-2A
Cost per equivalent unit; costs assigned to products -
P20-2A
Fairfax Company uses weighted-average process
costing to account for its production costs. Direct labor is added evenly
throughout the process. Direct materials are added at the beginning of the
process. During September, the company transferred 735,000 units of product to
finished goods. At the end of September, the goods in process inventory
consists of 207,000 units that are 90% complete with respect to labor. Beginning
inventory had $244,920 of direct materials and $69,098 of direct labor cost.
The direct labor cost added in September is $1,312,852, and the direct
materials cost added is $1,639,080.
Required
1. Determine the
equivalent units of production with respect to (a) direct labor and (b) direct
materials.
2. Compute both the
direct labor cost and the direct materials cost per equivalent unit.
3. Compute both direct
labor cost and direct materials cost assigned to (a) units completed and
transferred out, and (b) ending goods in process inventory.
Analysis
Component
4. The company sells and ships all
units to customers as soon as they are completed. Assume that an error is made
in determining the percentage of completion for units in ending inventory.
Instead of being 90% complete with respect to labor, they are actually 65%
complete. Write a one-page memo to the plant manager describing how this error
affects its September financial statements.
Check
(2) Direct labor cost per equivalent unit, $1.50 (3b) $693,450
TUTORIAL
PREVIEW
|
Cost per equivalent unit of
production
|
Direct materials
|
Direct labor
|
|
Cost of beginning goods in
progress
|
$ 244,920
|
$
69,098
|
|
Costs incurred this period
|
1,639,080
|
1,312,852
|
|
Totals
|
$
1,884,000
|
$
1,381,950
|
|
|
Correct
|
Correct
|
File
name: P20-2A-Fairfax-Company.xls File type: XLS Price: $9
