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

Exercise 39

Weighted-Average Method Gifford, Inc. produces a single model of a popular cell phone in large quantities. A single cell phone moves through two departments, assembly and testing. The manufacturing costs in the assembly department during March follow:

Direct materials added	$187,500
Conversion costs	165,410
	$352,910

The assembly department has no beginning work-in-process inventory. During the month, it started 25,000 cell phones, but only 22,000 were fully completed and transferred to the testing department. All parts had been made and placed in the remaining 3,000 cell phones, but only 60 percent of the conversion had been completed. The company uses the weighted-average method of process costing to accumulate product costs.

Required

1. Compute the equivalent units and cost per equivalent unit for March in the assembly department.

2. Compute the costs of units completed and transferred to the testing department.

3. Compute the costs of the ending work-in-process.

Step 1 of 7

Weighted Average Cost Method in Equivalent Production:

In FIFO method, we ignore the work already done and expenditure already incurred on WIP. However, in average cost method, these two factors are taken into consideration.

Equivalent ProductIt means expressing incomplete performance in terms of complete performance. For e.g. If there are 10000 units of closing stock and 40% work is done on each unit, it can be concluded that complete work is done on 4000 units and no work is done on remaining 6000 units.