Larsen Company manufactures car seats in its San Antonio plant.
Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Larsen Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing.
Larsen Company uses the weighted-average method of process costing. Data for the assembly department for October 2014 are as follows:
Physical Units Direct Materials Conversion Costs (Car Seats)
Work in process, October 1a 5,000 $1,250,000 $402,750
Started during October 2014 20,000
Completed during October 2014 22,500
Work in process, October 31b 2,500
Total costs added during October 2014 $4,500,000 $2,337,500
A Degree of completion: direct materials,?%; conversion costs, 60%.
B Degree of completion: direct materials,?%; conversion costs, 70%
1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule.
2. What issues should the manager focus on when reviewing the equivalent units calculation?
3. For each cost category, summarize total assembly department costs for October 2014 and calculate the cost per equivalent unit.
4. Assign costs to units completed and transferred out and to units in ending work in process.