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

Exercise 28

Equivalent Units; Weighted-Average Method Oregon Fisheries, Inc., processes salmon for various distributors. Two departments, processing and packaging, are involved. Data relating to tons of salmon sent to the processing department during May follow:

	Tons of Salmon	Percent Completed
		Materials	Conversion
Work-in-process inventory, May 1	1,500	80%	70%
Work-in-process inventory, May 31	2,500	50	30
Started processing during May	8,000

Required

1. Calculate the number of tons completed and transferred out during the month.

2. Calculate the number of equivalent units for both materials and conversion for the month of May, assuming that the company uses the weighted-average method.

Step 1 of 4

Under process-based manufacturing units, cost flow assumption is required to be made for assigning the costs i.e. whether the inventory flows as per First in First out (FIFO), or weighted average cost method. The major 5 steps under process costing are:

a. Analyze the physical flow of production units

b. Compute equivalent units of for each manufacturing cost element

c. Determine the total costs for each manufacturing cost element

d. Calculate cost per equivalent unit each manufacturing cost element

e. Allocate total manufacturing cost to both viz., completed units and closing WIP