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Units of Production by using weighted average method

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The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below:

Percent completed
Units Materials Conversion
Work in process, June 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%

The department started 475,000 units into production during the month and transferred 480,000 completed units to the next department. Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.

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Solution Summary

The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below:

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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.

Required
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)

Required

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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