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

Exercise 30

Equivalent Units; Weighted-Average Method Eastern Oregon Lumber Company grows, harvests, and processes timber for use as building lumber. The following data pertain to the company’s sawmill:

Work-in-process inventory, January 1 (materials: 60 percent; conversion: 40 percent)	30,000 units
Work-in-process inventory, December 31(materials: 70 percent; conversion: 60 percent)	15,000 units

During the year the company started 150,000 units in production.

Required Prepare a physical flow schedule and compute the number of equivalent units of both direct materials and conversion for the year, using the weighted-average method.

Step 1 of 5

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