Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Opening
stock
Work done in
current period
Direct materials Conversion costs
€23,000
€10,000
€25,000
€11,000 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 bFIFO
(Solution
Exhibit 4.21)


Difference
Cost of units completed and transferred out Work in progress, closing Total costs accounted for
€3,192,866 322,134
€3,515,000
€3,188,000 327,000
€3,515,000
−€4,866
+€4,866 The FIFO closing stock is higher than the weighted-average closing stock by €4,866. 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 4.21
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, Assembly Department of Euro-Défense for October 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)
20 23,000 2,460,000 12 10,000 120,000
,580,000 Work done in current period only
(from Solution Exhibit B
80 25,000 2,000,000 85 11,000 935,000 2,935,000 To account for
100 2,460,000 97 1,055,000 3,515,000
Panel B
Assignment of costs Completed and transferred out
(90 physical units)


Work in progress, opening
(20 physical units)

20 23,000 2,460,000 12 10,000 1,120,000 3,580,000 Work done in current period to complete opening work in progress
0
*
25,000 0

8

11,000 88,000 88,000 Total from opening stock
20 2,460,000 20 1,
208,000 2,668,000 Started and completed
(70 physical units)

70

25,000 1,750,000

70

11,000 770,000 2,520,000 Total completed and transferred out
(90 physical units)
90 2,210,000 90 978,000 3,188,000 Work in progress, closing (10 physical units)
10

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