Belda Co. manufactures a single product in one department. Direct labor and overhead are added evenly throughout the process. Direct materials are added as needed. The company uses the FIFO method of process costing. During March, the company completed and transferred 220,000 units to finished goods inventory. Of the units completed, 10,000 were from beginning inventory and the remaining 210,000 were started and completed during the month. Beginning goods in process were 75% complete with respect to direct materials and 60% complete with respect to direct labor and overhead. The company has 40,000 units (50% complete with respect to direct materials and 30% complete with respect to direct labor and overhead) in process at month- end. Information on costs of beginning inventory and costs added during the month follows.

1. Prepare the company’s process cost summary for March using the FIFO method.
2. Prepare the journal entry dated March 31 to transfer the cost of completed units to finished good inventory.
Analysis Component
3. The company provides incentives to department managers by paying monthly bonuses based on their success in controlling costs per equivalent unit of production. Assume that the production department overestimates the percentage of completion for units in ending inventory with the result that its equivalent units of production for March are overstated. What impact does this error have on bonuses paid to the managers of the production department? What impact, if any, does this error have on these managers’ Aprilbonuses?

  • CreatedNovember 29, 2013
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