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Equivalent Units of Production - Weighted Average Method

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Auger Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in Process, beginning:
Units in Process - 700
% Complete (materials) - 80%
% Complete (conversion) - 40%

Costs in the Beginning Inventory
Material Cost - $1,904
Conversion Cost - $8,624
Units Started into Production during month - 29,000
Units Completed and Transferred Out - 28,800

Costs Added to Production during Month
Material Cost - $104,044
Conversion Cost - $875,266

Work in Process, Ending
Units in Process - 900
% Complete (Materials) - 70%
% Complete (Conversion) - 20%


i. Determine the equivalent units of production.

ii. Determine the costs per equivalent unit.

iii. Determine the cost of ending work in process inventory.

iv. Determine the cost of the units transferred to the next department

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The solution computes equivalent units of production using weighted average method.

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Study Guide
Practice Exercise

Why is a process cost system not appropriate for company that produce items that are distinctly different form one another?

What is the weighted average method of determining equivalent units? Why is it used? What are its weaknesses?

Process costing: determining equivalent units and allocating costs

Walker Corporation, which makes suitcases, completed 21,000 suitcases in august 2006. at the end of august, work in process inventory consisted of 3,000 suitcases estimated to be 40 percent complete. Total product costs for August amounted to $666,000.

a. Determine the cost per equivalent unit.
b. Determine the cost of the goods transferred to finished goods.
c. Determine the cost of the ending work in process inventory.

Exercise 12 21B on page 564

Cowboy Gifts makes unique western gifts that are sold at souvenir shops. One of the company's more popular products is a ceramic Eagle that is produced in a mass production process that entails two manufacturing stages. In the first production stage ceramic glass is heated and molded into the shape of the Eagle by the Corporation Department. Finally, color and artistic detail is applied to the Eagle by the Finishing Department. The company has jus hired a new accountant who will be responsible for preparing the Cost of Production Report for June 2006. The account is given the following inventory from which to prepare his report.

Department Cost Information for June

Compression Finishing
Costs in beginning inventory $3000 $14400
Costs added during June:
Materials $42000 $18120
Labor $20000 $13200
Overhead $90000 $62000

Department Product Information for June

Compression Finishing
Units in beginning in inventory 5000 1800
Units started 26000 23000
Units in ending inventory 8000(25% complete) 4800(80% complete)


a. Prepare a Cost of Production Report for the Compression Department for June.
b. Prepare a Cost of Production report for the Finishing Department for June.
c. If 48000 units are sold in June for $160,000, determine the company's gross margin for June.

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