Question

Company manufactures car seats in its Atlanta plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the testing department. Direct materials are added when the testing department process is 95​% complete. Conversion costs are added evenly during the testing​ department's process. As work in assembly is​ completed, each unit is immediately transferred to testing. As each unit is completed in​ testing, it is immediately transferred to Finished Goods. Kaeding Company uses the FIFO method of process costing. Data for the testing department for October 2017 are as​ follows:

	Physical Units (Car Seats)	Transferred-In Costs	Direct Materials	Conversion Costs
Work in progress, October 1^a	7,500	$ 2,878,000	$ 0	$ 796,725
Transferred in during October 2017	?
Completed during October 2017	25,300
Work in progress, October 31^b	3,700
Total costs added during October 2017		$ 7,503,500	$ 9,436,900	$ 3,764,475

a.) Degree of​ completion: transferred-in​ costs, ?%; direct​ materials, ?%; conversion​ costs, 65​%.

b.) Degree of​ completion: transferred-in​ costs, ?%; direct​ materials, ?%; conversion​ costs, 50​%

Questions:

1.	What is the percentage of completion for​ (a) transferred-in costs and direct materials in beginning​ work-in-process inventory and​ (b) transferred-in costs and direct materials in ending​ work-in-process inventory?
2.	For each cost​ category, compute equivalent units in the testing department. Show physical units in the first column of your schedule.
3.	For each cost​ category, summarize total testing department costs for October 2017​, calculate the cost per equivalent​ unit, and assign costs to units completed​ (and transferred​out) and to units in ending work in process.
4.	Prepare journal entries for October transfers from the assembly department to the testing department and from the testing department to Finished Goods.

Answer 1

Solution 1:

% of completion for transferred in cost in beginning WIP = 100%

% of completion for direct material in beginning WIP = 0%

% of completion for transferred in cost in Ending WIP = 100%

% of completion for direct material in Ending WIP = 0%

Solution 2:

Testing Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Transferred in cost	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	7500
Units started this period	21500
Total unit to be accounted for	29000
Units Accounted for:
Units completed and transferred out
From beginning inventory Transferred In - 0% Material - 100% Conversion- 35%	7500	0	7500	2625
Started and completed currently	17800	17800	17800	17800
Units in ending WIP Transferred In - 100% Material - 0% Conversion - 40%	3700	3700	0	1850
Total units accounted for	29000	21500	25300	22275

Solution 3:

Testing Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Transferred in cost	Material	Conversion
Current period cost	$20,704,875.00	$7,503,500.00	$9,436,900.00	$3,764,475.00
Equivalent units		21500	25300	22275
Cost per equivalent unit		$349.00	$373.00	$169.00

Testing Department
Producton cost report - FIFO
Particulars	Total cost	Transferred in cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$3,674,725.00	$2,878,000.00	$0.00	$796,725.00
Current cost added to complete beginning WIP:
Transferred In cost	$0.00	$0.00
Material (7500*$373)	$2,797,500.00		$2,797,500.00
Conversion (2625*$169)	$443,625.00			$443,625.00
Total Cost from beginning inventory	$6,915,850.00	$2,878,000.00	$2,797,500.00	$1,240,350.00
Current cost of unit started and completed:
Transferred In cost (17800*$349)	$6,212,200.00	$6,212,200.00
Material (17800*$373)	$6,639,400.00		$6,639,400.00
Conversion (17800*$169)	$3,008,200.00			$3,008,200.00
Total cost of unit started and completed	$15,859,800.00	$6,212,200.00	$6,639,400.00	$3,008,200.00
Total cost of unit transferred out	$22,775,650.00	$9,090,200.00	$9,436,900.00	$4,248,550.00
Cost assigned to ending WIP:
Transferred In cost (3700*$349)	$1,291,300.00	$1,291,300.00
Material (0*$373)	$0.00		$0.00
Conversion (1850*$169)	$312,650.00			$312,650.00
Total ending WIP inventory	$1,603,950.00	$1,291,300.00	$0.00	$312,650.00
Total cost accounted for	$24,379,600.00	$10,381,500.00	$9,436,900.00	$4,561,200.00

Solution 4:

Journal Entries
Particulars	Debit	Credit
WIP - Testing Department Dr	$7,503,500.00
To WIP - Assembly Department		$7,503,500.00
(Being assembly department cost transferred to Testing department)
Finished goods Dr	$22,775,650.00
To WIP - Testing Department		$22,775,650.00
(Being goods completed transferred to finished goods)