17-38 Transferred-in costs, weighted-average method. Bookworm, Inc.

, has two
departments: printing and binding. Each department has one direct-cost category (direct
materials) and one indirect-cost category (conversion costs). This problem focuses on the
binding department. Books that have undergone the printing

process are immediately transferred to the binding department. Direct material is added
when the binding process is 80% complete. Conversion costs are added evenly during
binding operations. When those operations are done, the books are immediately transferred
to Finished Goods. Bookworm, Inc., uses the weighted-average method of process costing.
The following is a summary of the April 2012 operations of the binding department:

Physical Units Transferred-In Direct Conversion

(books) Costs Materials Costs

Beginning work 1,050 $ 32,550 $0 $13,650

in process

100% 0% 50%

Degree of
completion,
beginning work
in process

Transferred in 2,400
during April
2012
Completed and 2,700
transferred out
during April

Ending work in 750

process (April
30)
Degree of 100% 0% 70%
completion,
ending work in
process

Total costs $129,600 $23,490 $70,200

added during
April

1. Summarize total binding department costs for April 2012, and assign these costs to units
completed (and transferred out) and to units in ending work in process.
 Answer:
(Step 1) (Step 2)
Equivalent Units
Direct
Physical Transferred Material Conversio
Flow of Production Units -in Costs s n Costs

Work in process, beginning (given) 1,050

Transferred-in during current period (given) 2,400
To account for 3,450
Completed and transferred out during current
period: 2,700 2,700 2,700 2,700
Work in process, endinga (given) 750

(750  100%; 750  0%; 750  70%) 750 0 525

Accounted for
Equivalent units of work done to date 3450 3,450 2,700 3,225

Total
Production Direct
    Costs Transferred-in Costs Materials Conversion Costs
(Step Work in process, beginning
3) (given) $ 46,200 $ 32,550 $ 0 $13,650
Costs added in current period
(given) 223,290 129,600 23,490 70,200
Total costs to account for $269,490 $162,150 $23,490 $83,850

(Step
4) Costs incurred to date $162,150 $23,490 $83,850

Divide by equivalent units of

work done to date ÷ 3,450 ÷ 2,700 ÷ 3,225
Cost per equivalent unit of
work done to date $ 47.00 $ 8.70 $ 26.00

(Step
5) Assignment of costs:
Completed and transferred out
(2,700 units) $220,590 (2,700 × $47.00) + (2,700 × $8.70) + (2,700 × $26)

Work in process, ending (750

units): 48,900 (750 × $47.00) + (0 × $8.70) + (525 × $26)

+
Total costs accounted for $269,490 $162,150 $23,490 + $83,850

2. Prepare journal entries for April transfers from the printing department to the binding
department and from the binding department to Finished Goods.

Answer:
Journal entries:
a. Work in Process–– Binding Department 129,600
Work in Process––Printing Department
129,600
Cost of goods completed and transferred out
during April from the Printing Department
to the Binding Department
b. Finished Goods 220,590
Work in Process–– Binding Department
220,590
Cost of goods completed and transferred out
during April from the Binding Department
to Finished Goods inventory

17-39 Transferred-in costs, FIFO method. Refer to the information in Problem 17-38.
Suppose that Bookworm, Inc., uses the FIFO method instead of the weighted-average
method in all of its departments.

The only changes to Problem 17-38 under the FIFO method are that total transferred-in
costs of beginning work in process on April 1 are $36,750 (instead of $32,550) and that total
transferred-in costs added during April are $124,800 (instead of $129,600).

Required

1. Using the FIFO process-costing method, complete Problem 17-38.

Answer:
(Step
(Step 2)
1)

Equivalent Units

Physi Transferr Direct

Conversion
Flow of Production cal ed-in Material
Costs
Units Costs s

Work in process, beginning (given) 1,050 (work done before current period)

Transferred-in during current period (given) 2,400

To account for 3,450

Completed and transferred out during current

period:

From beginning work in processa 1,050

[1,050  (100% – 100%); 1,050  (100% – 0%); 1,05

0 525
1,050  (100% – 50%)] 0

Started and completed

(1,650  100%; 1,650  100%; 1,650  100%)

1,65 1,65
1650 1,650
0 0

Work in process, endingc (given)

(750  100%; 750  0%; 750  70%) 750 750 0 525

____
Accounted for ____ ____ ____
_

2,40 2,70
Equivalent units of work done in current period 3450 2,700
0 0

Total Direct Conversion

Transferred-in
Producti
Costs Materials Costs
on Costs

$
(Step $13,65
Work in process, beginning (given) 50,40 $ 36,750 $4
3) 0
0

218,4 $83,85
Costs added in current period (given) 124,800 $23,490
90 0

$268, $23, $83,85

Total costs to account for $161,550
890 490 0

(Step $23, $70,20

Costs added in current period $124,800
4) 490 0

÷
Divide by equivalent units of work done in current ÷
÷ 2,400 2,70
period (Sol. Exhibit 17-39A) 2,700
0
 Cost per equivalent unit of work done in current $ $
$ 52.00
period 8.70 26.00

(Step
Assignment of costs:
5)

Completed and transferred out (2,700 units)

$
$36,750 + $0 +
Work in process, beginning (1,050 units) 50,40
$13,650
0

Costs added to beginning work in process in current 22,78 (0 × $52.00) + (1,050× $8.70) + (525
period 5 × $26)

73,18
Total from beginning inventory
5

143,0 (1,650 × $52.00) + (1,650b × $8.70) +

Started and completed (1,650 units)
55 (1,650b × $26)

Total costs of units completed and 2

transferred out 16,240

52,65 (750 × $52.00) + (0 × $8.70) +

Work in process, ending (750 units):
0 (525 × $26)

+ +
$268,
Total costs accounted for $161,550 $23, $83,85
890
490 0

2. If you did Problem 17-38, explain any difference between the cost of work completed and
transferred out and the cost of ending work in process in the binding department under the
weighted-average method and the FIFO method.

Beginning Work Done in

Inventory Current Period
Transferred-in costs (weighted average) $31.00 ($32,550  1,050) $54.00 ($129,600  2,400)
Transferred-in costs (FIFO) $35.00 ($36,750  1,050) $52.00 ($124,800  2,400)
Direct materials — $ 8.70
$26.00 ($13,650  525)
Conversion costs $26.00

The following table summarizes the costs assigned to units completed and
those still in process under the weighted-average and FIFO process-costing methods
for the Binding Department.
 Weighted fifo Difference
Average

Cost of units completed and transferred out $220,590 $216,240 –$4,350

Work in process, ending 48,900 52,650 +$3,750
Total costs accounted for $269,490 $268,890

The FIFO ending inventory is higher than the weighted-average ending inventory by
$3,750. This is because FIFO assumes that all the lower-cost prior-period units in
work in process (resulting from the lower transferred-in costs in beginning inventory)
are the first to be completed and transferred out while ending work in process
consists of only the higher-cost current-period units. The weighted-average method,
however, 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 beginning work in process are placed in ending work in process. Hence, in
this case, the weighted-average method results in a higher cost of units completed
and transferred out and a lower ending work-in-process inventory relative to FIFO.
Note that the difference in cost of units completed and transferred out (–$4,350)
does not exactly offset the difference in ending work-in-process inventory (+$3,750).
This is because the FIFO and weighted-average methods result in different values for
transferred-in costs with respect to both beginning inventory and costs transferred
in during the period.