1. Bingham Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below.

Work in process, beginning:

Units in beginning work-in-process inventory


Materials costs


Conversion costs


Percentage complete for materials


Percentage complete for conversion


Units started into production during the month


Units transferred to the next department during the month


Materials costs added during the month


Conversion costs added during the month


Ending work in process:

Units in ending work-in-process inventory


Percentage complete for materials


Percentage complete for conversion


Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department.

2. (Ignore income taxes in this problem.) Five years ago, the City of Paranoya spent $30,000 to purchase a computerized radar system called W.A.S.T.E. (Watching Aliens Sent To Earth). Recently, a sales rep from W.A.S.T.E. Radar Company told the city manager about a new and improved radar system that can be purchased for $50,000. The rep also told the manager that the company would give the city $10,000 in trade on the old system. The new system will last 10 years. The old system will also last that long but only if a $4,000 upgrade is done in 5 years. The manager assembled the following information to use in the decision regarding which system is more desirable:

Old System

New System

Cost of radar system



Current salvage value


Salvage value in 10 years



Annual operating costs



Upgrade required in 5 years


Discount rate



(a) What is the City of Paranoya’s net present value for the decision described above? Use the total cost approach.

(b) Should the City of Paranoya purchase the new system or keep the old system?

1. Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below:

Units in beginning inventory


Units produced


Units sold




Less cost of goods sold:

Beginning inventory


Add cost of goods manufactured


Goods available for sale


Less ending inventory


Cost of goods sold


Gross margin


Less selling and admin. expenses


Net operating income


Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.