Wooly Corp. produces wool scarves, and they are approaching their busy season that runs from October to March of the following year. Wooly has spent a lot of time re-targeting their advertising efforts and believes that they will begin to see an increase in sales during the next year of 10-15%. In an effort to improve their operations, they are refining their Process Costing methods and attempting to do a better job of determining equivalent units and their related costs. Geraldine, their Senior Cost accountant has been gathering data so that she can prepare some estimates to present to management at their upcoming meeting. Geraldine has compiled the following information for the most recent calendar year:
Geraldine would like to explore the potential use of both First-In, First-Out (FIFO) and Weighted-Average before making a recommendation to management.
a. What are the total costs to account for both Direct Materials and Conversion Costs under Weighted-Average? What are the costs to be included in the cost per equivalent unit calculation for both Direct Materials and Conversion Costs under Weighted-Average?
b. What are the total costs to account for both Direct Materials and Conversion Costs under FIFO? What are the costs to be included in the cost per equivalent unit calculation for both Direct Materials and Conversion Costs under FIFO?
c. Does the industry in which a company operates impact which method they are likely to select? Why or why not? Which method should Geraldine recommend to the management of Wooly? Please provide as much detail as possible in your response.

Question

Wooly Corp. produces wool scarves, and they are approaching their busy season that runs from October to March of the following year. Wooly has spent a lot of time re-targeting their advertising efforts and believes that they will begin to see an increase in sales during the next year of 10-15%. In an effort to improve their operations, they are refining their Process Costing methods and attempting to do a better job of determining equivalent units and their related costs. Geraldine, their Senior Cost accountant has been gathering data so that she can prepare some estimates to present to management at their upcoming meeting. Geraldine has compiled the following information for the most recent calendar year:
  Geraldine would like to explore the potential use of both First-In, First-Out (FIFO) and Weighted-Average before making a recommendation to management.
a. What are the total costs to account for both Direct Materials and Conversion Costs under Weighted-Average? What are the costs to be included in the cost per equivalent unit calculation for both Direct Materials and Conversion Costs under Weighted-Average?
b. What are the total costs to account for both Direct Materials and Conversion Costs under FIFO? What are the costs to be included in the cost per equivalent unit calculation for both Direct Materials and Conversion Costs under FIFO?
c. Does the industry in which a company operates impact which method they are likely to select? Why or why not? Which method should Geraldine recommend to the management of Wooly? Please provide as much detail as possible in your response.

Quizplus · Accepted Answer

The Answer of Wooly Corp. produces wool scarves, and they are approaching their busy season that runs from October to March of the following year. Wooly has spent a lot of time re-targeting their advertising efforts and believes that they will begin to see an increase in sales during the next year of 10-15%. In an effort to improve their operations, they are refining their Process Costing methods and attempting to do a better job of determining equivalent units and their related costs. Geraldine, their Senior Cost accountant has been gathering data so that she can prepare some estimates to present to management at their upcoming meeting. Geraldine has compiled the following information for the most recent calendar year:
  Geraldine would like to explore the potential use of both First-In, First-Out (FIFO) and Weighted-Average before making a recommendation to management.
a. What are the total costs to account for both Direct Materials and Conversion Costs under Weighted-Average? What are the costs to be included in the cost per equivalent unit calculation for both Direct Materials and Conversion Costs under Weighted-Average?
b. What are the total costs to account for both Direct Materials and Conversion Costs under FIFO? What are the costs to be included in the cost per equivalent unit calculation for both Direct Materials and Conversion Costs under FIFO?
c. Does the industry in which a company operates impact which method they are likely to select? Why or why not? Which method should Geraldine recommend to the management of Wooly? Please provide as much detail as possible in your response.