Switch 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 monthly reporting periods for its weighted-average process cost accounting. During January, Switch completed and transferred 220,000 units of product to finished goods inventory. Its 10,000 units of beginning goods in process consisted of $7,500 of direct materials, $14,240 of direct labor, and $35,600 of factory overhead. 40,000 units (50% complete with respect to direct materials and 30% complete with respect to direct labor and over-head) are in process at month- end. After entries for direct materials, direct labor, and overhead for January, the company’s Goods in Process Inventory account follows.

1. Prepare the company’s process cost summary for January using the weighted- average method.
2. Prepare the journal entry dated January 31 to transfer the cost of completed units to finished goods inventory.
Analysis Components
3. The cost accounting process depends on several estimates.
a. Identify two major estimates that affect the cost per equivalent unit.
b. In what direction might you anticipate a bias from management for each estimate in part 3a (assume that management compensation is based on maintaining low inventory amounts)? Explain youranswer.

  • CreatedNovember 29, 2013
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