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

Exercise 32

Equivalent Units; Weighted-Average and FIFO Methods Baker Company has the following information for December 1 to December 31. All direct materials are 100 percent complete; beginning materials cost $12,000.

Work-in-Process
Beginning balance		Completed 800 units and transferred to finished
December 200 units,
9 percent complete for conversion	$14,000	goods inventory	$140,000
Direct materials	54,000
Direct labor	34,000
Factory overhead
Property taxes	6,000
Depreciation	32,000
Utilities	18,000
Indirect labor	4,000
Ending balance December 31, 300 units, 12 percent complete	22,000

Required Calculate equivalent units using the weighted-average and FIFO methods.

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