Crushed Inc. is a factory that manufactures and distributes gravel to local construction companies. Their sales have increased year-over-year, and management would like to ensure that all of their accounting information is set up for success. They utilize Process Costing and have been trying to determine whether they should use the First-In, First-Out (FIFO) method or the Weighted-Average method. Crushed has gathered the following information:
Direct Materials:
Beginning Work-in-Progress (WIP) Inventory: $1,765
Costs Added During the Year: $17,890
Conversion Costs:
Beginning WIP Inventory: $3,010
Costs Added During the Year: $22,777
Management believes that finalizing these decisions is the last piece to having their Process Costing streamlined and updated. Taking all of this information into consideration, please answer the following questions.
a. What are the total Conversion Costs to be accounted for under both the FIFO and Weighted-Average method?
b. What are the Conversion Costs that would be included in the calculation for Cost per Equivalent Units under both FIFO and Weighted-Average method?
c. Between FIFO and Weighted-Average, which method is the accountant likely to use? If Crushed decides that they prefer the use of the other method the following year, is this a switch that would be easy to make?

Question

Quizplus · Accepted Answer

The Answer of Crushed Inc. is a factory that manufactures and distributes gravel to local construction companies. Their sales have increased year-over-year, and management would like to ensure that all of their accounting information is set up for success. They utilize Process Costing and have been trying to determine whether they should use the First-In, First-Out (FIFO) method or the Weighted-Average method. Crushed has gathered the following information:
Direct Materials:
Beginning Work-in-Progress (WIP) Inventory: $1,765
Costs Added During the Year: $17,890
Conversion Costs:
Beginning WIP Inventory: $3,010
Costs Added During the Year: $22,777
Management believes that finalizing these decisions is the last piece to having their Process Costing streamlined and updated. Taking all of this information into consideration, please answer the following questions.
a. What are the total Conversion Costs to be accounted for under both the FIFO and Weighted-Average method?
b. What are the Conversion Costs that would be included in the calculation for Cost per Equivalent Units under both FIFO and Weighted-Average method?
c. Between FIFO and Weighted-Average, which method is the accountant likely to use? If Crushed decides that they prefer the use of the other method the following year, is this a switch that would be easy to make?