Opening
Stock
Work done in
current period
Direct materials Conversion costs
€25 17.7083
€31.8182
€21.197 The following table summarises the costs assigned to units completed and those still in progress under the weighted-average and FIFO process-costing methods for our example.
Weighted
average
(Solution
Exhibit Cb b
FIFO
(Solution
Exhibit 4.23)
Difference
Cost of units completed and transferred out Work in progress, closing Total costs accounted for
€104,000 18,125
€122,125
€103,566 18,559
€122,125
+€434
−€434 The FIFO closing stock is higher than the weighted-average closing stock by €434. This is because FIFO assumes that all the lower-cost prior-period units in work in progress are the first to be completed and transferred out while closing work in progress consists of only the higher- cost current-period units. However, the weighted-average method smoothes out cost per equivalent unit by assuming that more of the higher-cost units are completed and transferred out, while some of the lower-cost units in opening work in progress are placed in closing work in progress. Hence, in this case, the weighted-average method results in a higher cost of units completed and transferred out and a lower closing work-in-progress stock relative to FIFO.
Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 Solution Exhibit 4.23 Step 4: Summarise total costs to account for and assign these costs to units completed and units in closing work in progress using the FIFO method, Forming Department of Sligo Toys for April 2010 (in €). Total production Direct materials Conversion costs costs Cost per Cost per Equivalent equivalent Total Equivalent equivalent Total units unit costs units unit costs (1) (2) (3)=(1)×(2) (4) (5) (6)=(4)×(5) (7)=(3)+(6) Panel Ab Total costs to account for Work in progress, opening
(from Solution Exhibit B)
300 25.0000 7,500 0120 17.7083 2,125 9,625 Work done in current period only
(from Solution Exhibit B)
2,200 31.8182 70,000 2,005 21.1970 42,500 112,500 To account for
2,500 77,500 2,125 44,625 122,125
Panel B
Assignment of costs Completed and transferred out
(2,000 physical units)
Work in progress, opening
(300 physical units)
1,300 25,0000 7,500 120 17.7083 2,125 229,625 Work done in current period to complete opening work in progress 0
*
31.8182 0
‡ 180
†
21.1970 3,815 3,815 Download 1.72 Mb.
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