[ckarmst1959]

Cost from Beginning Inventory Cost from Current Period

Direct Materials $3,650 $31,620

Conversion Costs 9,120 143,100

At the beginning of the period, there were 800 units in process that were 60% complete as to conversion costs and 100% complete as to direct materials cost.
During the current period, 5,800 units were started and completed. Ending inventory contained 400 units that were 60% complete as to conversion costs and 100% complete as to direct materials costs. (Assume that the company uses FIFO process costing method).


The total costs that will be transferred into the Finished Goods Inventory account during the current period are ________? My anwer is $183, 840. The correct answer is $182,160. I'm not sure what I'm doing wrong... see attempt to solve below:

Beginning Inventory Unit Cost
Direct Materials 800 units, 100% complete 3,650 4.5625
Conversion Cost 800 units, 60% complete 9,120 11.4 7.6 19
Total Beginning Inventory 12,770

Current Period
Direct Materials 800 units, 100% Complete 3,650 4.5625
Direct Materials 5,000 units, 100% Complet 27,970 5.594
$31,620

Conversion Cost 800 units, 60% complete 9,120
Conversion Cost 800 units, 40% Complete 6,080 7.6
Conversion Cost 5,000 units, 100% Complete 137,020 27.404
152,220

Ending Inventory
Direct Materials 400 units, 100% complete 2,238 5.594
Conversion Cost 400 units, 60% complete 6,577 27.404 8,815
Finished Goods Inventory
Direct Materials 31,620
Conversion Cost 152,220
183,840 My Answer

[morgaine300]

I can't even follow what you're doing. I can see some of it, but other parts of it, no clue where you're getting numbers. And I don't see the method at all. You need to learn to set this up in a neat manner.

You can't just take individual costs and start dividing by units. You have to get the equivalent units first and I don't even see that. Maybe it's in that work somewhere, like you tried to do it with the costs instead or something. I didn't check it thoroughly cause it isn't a correct method to begin with.

You have 800 in beginning inventory, 5800 of started & completed, and 400 in ending inventory. DO NOT try to change these. Like where did 5000 units come from? You need to keep this split into these categories.

You have to apply an amount of current costs to FINISH the beginning inventory. On a FIFO method don't try to include the beginning costs in with anything yet. You also have to apply current costs to the started & completed. And you have to apply current costs to start the ending inventory.

As you can see, at first you are only working with the current costs. We need to know first how to divide up the current costs among the three categories. Once that is done, you can tag on the beginning inventory costs.

I also don't know where you learned that method. It's a lot easier to keep the inventory split.

It's difficult to just "explain" this with no numbers, so I will do a quickie example of how to start the thing, though I'm not going to do a whole problem. I will show you the first two steps, which are accounting for your units, and equivalent units. This is out of a textbook problem.

[ckarmst1959]

I can't even follow what you're doing. I can see some of it, but other parts of it, no clue where you're getting numbers. And I don't see the method at all. You need to learn to set this up in a neat manner.

You can't just take individual costs and start dividing by units. You have to get the equivalent units first and I don't even see that. Maybe it's in that work somewhere, like you tried to do it with the costs instead or something. I didn't check it thoroughly cause it isn't a correct method to begin with.

You have 800 in beginning inventory, 5800 of started & completed, and 400 in ending inventory. DO NOT try to change these. Like where did 5000 units come from? You need to keep this split into these categories.

You have to apply an amount of current costs to FINISH the beginning inventory. On a FIFO method don't try to include the beginning costs in with anything yet. You also have to apply current costs to the started & completed. And you have to apply current costs to start the ending inventory.

As you can see, at first you are only working with the current costs. We need to know first how to divide up the current costs among the three categories. Once that is done, you can tag on the beginning inventory costs.

I also don't know where you learned that method. It's a lot easier to keep the inventory split.

It's difficult to just "explain" this with no numbers, so I will do a quickie example of how to start the thing, though I'm not going to do a whole problem. I will show you the first two steps, which are accounting for your units, and equivalent units. This is out of a textbook problem.

Thank you for your help. I will continue to work on this. I apologize for not sending the Excel file with my question. The format that I typed this in was not retained when I submitted the question. I have attached the spreadsheet.

[morgaine300]

Well, it's easier to read in the Excel file, but I actually was able to follow the numbers themselves - i.e. I figured out what was supposed to be in what "column." But the way you're doing it isn't right, so the Excel file isn't helping me follow what you're doing.

See what happens after you try to follow my example. If you get through the equivalent unit part correctly, then I'll continue the example for the cost part.

[hari23]

Avery Corporation's northwestern factory provided the following information for the last calendar year: Beginning inventory: Direct materials $50,800 Work in process: $58,500 Ending inventories: Direct materials: $21,500 Work in process: $23,500
During the year, direct materials purchase amounted to $150,000, direct labor cost was $200,000, and overhead was $234,700. There were 100,000 units produced. Calculate the total cost of direct materials used. Calculate the cost of goods manufactured. Calculate unit manufacturing cost. Of the unit manufacturing cost calculated assume $1.70 is direct materials and $3.24 is overhead. What is the prime cost per unit? Conversion cost per unit?

[azamfatima]

The Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation's condensed income statement for the year ended 31 December 2008 follows:
Sales (200,000 units) $1,000,000
Costs of goods sold $600,000
Gross margin $400,000
Selling expenses $150,000
Administrative expenses $100,000 $250,000
Net profi t (before income taxes) $150,000

Monteiro's budget committee has estimated the following changes for 2009:
> 30% increase in number of units sold
> 20% increase in material cost per unit
> 15% increase in direct labour cost per unit
> 10% increase in variable indirect cost per unit
> 5% increase in indirect capacity-related costs
> 8% increase in selling expenses, arising solely from increased volume
> 6% increase in administrative expenses, reflecting anticipated higher wage and supply price levels.

Any changes in administrative expenses, caused solely by increased sales volume are considered immaterial. As inventory quantities remain fairly constant, the budget committee considered that for budget purposes any change in inventory valuation can be ignored. The composition of the cost of a unit of finished product during 2008 for materials, direct labour, and manufacturing support, respectively, was in the ratio of 3:2:1. In 2008, $40,000 of manufacturing support was for fixed costs. No changes in production methods or credit policies were contemplated for 2009.

Required
(a) Compute the unit sales price at which the Monteiro Manufacturing Corporation must sell its umbrellas in 2009 in order to earn a budgeted profit of $200,000.
(b) Unhappy about the prospect of an increase in selling price, Monteiro's sales manager wants to know how many units must be sold at the old price to earn the $200,000 budgeted profit. Compute the number of units which must be sold at the old price to earn $200,000.
(c) Believing that the estimated increase in sales is overly optimistic, one of the company's director wants to know what annual profit is likely if the selling price determined in (a) is adopted but the increase in sales volume is only 10%. Compute the budgeted profit in this case.