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

Exercise 56

Weighted-Average Process Costing; Spoilage (Appendix) Wetherby Paint Company, which manufactures quality paint to sell at premium prices, uses a single production department. Production begins by blending the various chemicals that are added at the beginning of the process and ends by filling the paint cans. The gallon cans are then transferred to the shipping department for crating and shipment. Labor and overhead are added continuously throughout the process. Factory overhead is applied on the basis of direct labor hours at the rate of $3 per hour. The company combines labor and overhead in computing product cost.

Prior to May, when a change in the process was implemented, work-in-process inventories were in­significant. The change in the process allows increased production but results in considerable amounts of work-in-process inventory. Also, the company had 1,500 spoiled gallons in May—one-half of which was normal spoilage and the rest abnormal spoilage. The product is inspected at the end of the production process.

These data relate to actual production during the month of May:

	Costs
Work-in-process inventory, May 1
Direct materials—chemicals	$ 45,500
Direct labor ($10 per hour)	8,500
May costs added:
Direct materials—chemicals	228,400
Direct labor ($10 per hour)	38,500

	Units
Work-in-process inventory, May 1 (25 percent complete)	4,000
Sent to shipping department	24,000
Started in May	26,000
Work-in-process inventory, May 31 (80 percent complete)	4,500

Required Prepare a production cost report for May using the weighted-average method.

Step 1 of 2

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.