question archive Comfort chair company manufacturers a standard recliner

Comfort chair company manufacturers a standard recliner

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Comfort chair company manufacturers a standard recliner. During? February, the? firm's Assembly Department started production of? 73,700 chairs. During the? month, the firm completed? 78,500 chairs, and transferred them to the Finishing Department. The firm ended the month with? 11,200 chairs in ending inventory. There were? 16,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was? 20% as to conversion? costs, while ending work in process was? 80% as to conversion costs.

Beginning inventory?:

Direct materials

?$24,800

Conversion costs

?$35,900

Manufacturing costs added during the accounting period

Direct materials

?$168,200

Conversion costs

?$278,400

What is the amount of direct materials cost assigned to ending? work-in-process inventory at the end of? February? ?(Round intermediary calculations to the nearest? cent.)

A.

?$27,200

B.

?$28,800

C.

?$25,536

D.

?$21,760

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  • C - $25,536

Step-by-step explanation

The requirement is to determine the direct materials cost assigned to ending? work-in-process inventory using the FIFO costing method. To accomplish this objective, we simply multiply the equivalent units of production (EUP) of the the ending work in process inventory by the direct materials cost per EUP. Accordingly, the procedures to be undertaken are as follows:

Step 1- Determine the EUP for direct materials

EUP is equal to the actual units multiplied by their respective percentage of completion. Since direct materials are added at the beginning of the production cycle, then the units in ending inventory are 100% complete as to direct materials.

Under FIFO, units from the beginning inventory are assigned EUP only to the extent necessary to complete them. In the problem above, these units are 100% complete as to direct materials and 20% as to conversion costs. Therefore, in the current period, these units are assigned 0% EUP for materials and 80% EUP for conversion costs.

Accordingly, the EUP for direct materials is determined as follows:

If the weighted average method had been used, the units from beginning inventory would have been assigned 100% EUP.

Step 2- Determine then direct materials cost per EUP

The direct materials cost per EUP is equal to the direct materials cost added during the period divided by the EUP for direct materials. Note that the direct materials costs in beginning inventory are not accounted for. This is because under FIFO, units from beginning inventory are costed separately.

Accordingly, the direct materials cost per EUP is determined as follows:

Step 3- Determine the direct materials cost assigned to ending work in process

Finally, the direct materials cost assigned to WIP-ending is equal to EUP-Materials multiplied by the cost per EUP.

Please see the attached file for the complete solution