Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 49

FIFO Method; Journal Entries You are engaged in the audit of the December 31, 2010, financial statements of Epworth Products Corporation. You are attempting to verify the costing of the work-in-process and finished goods ending inventories that were recorded on Epworth’s books as follows:

	Units	Cost
Work-in-process (50 percent complete as to labor and overhead)	300,000	$660,960
Finished goods	100,000	504,900

Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60 percent of direct labor costs. There was no finished goods inventory on January 1, 2010. Epworth uses the FIFO costing method. A review of Epworth’s 2010 inventory cost records disclosed the following information:

		Costs
	Units	Materials	Labor
Work-in-process inventory, January 1, 2010 (80 percent complete as to labor and overhead)	200,000	$ 200,000	$ 315,000
Started	1,000,000
Completed	900,000
Current period costs		1,300,000	1,995,000

Required Prepare a production cost report to verify the inventory balances and prepare necessary journal entries to correctly state the inventory of finished goods and work-in-process, assuming that the books have not been closed.

Step 1 of 5

Weighted Average Method:

Weighted Average Method is a method to determine inventory unit number which in the production from the prior period and fresh units in the current period. It is appropriate only when there is no major in the manufacturing cost per unit in opening and closing inventories count.