8/12/2019 Weighted Average Inventory Valuation
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Anurup Upadhyay
ACCT 1618 Professor Kathy Boeger
7/22/14
Weighted-Average Method
Under the weighted-average method, the cost per equivalent unit for a specific cost category is
computed by adding the cost of beginning work in process inventory and the cost added during the
period and then dividing the result by the equivalent units of production (pp. 148).
Equivalent units of production = Number of partially completed units * Percentage completion (pp. 148)
Equivalent units of production = Units of transferred to the next department or to finished goods +
Equivalent units in ending work in process inventory (pp. 148)
Cost per equivalent unit = Cost of beginning WIP inventory + Cost added during the period (pp. 150)
Equivalent units of production
For example, lets assume the following:
Data for Februarys operations at ABC Manufacturing, Inc.:
Work in process, beginning 3,000
Completion with respect to materials 50%
Completion with respect to conversion 40%
Units of production started in the month 1,500
Units completed and transferred to next department 3,500
Ending work in process 1,000
Completion with respect to materials 30%
Completion with respect to conversion 25%
Cost in the beginning inventory:
Materials Cost $10,000
Conversion Cost $5,000
Costs added to production during the period:
Materials Cost $350,000
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Conversion Cost $200,000
Based on the information above,
Equivalent Units of Production (pp. 149)
Former Department Materials Conversion
Units transferred to next department 3,500 3,500
Ending work in process:
Materials: 30% of 1000 300
Conversion: 25% of 1000 250
Equivalent units of production 3,800 3,750
Now,
Cost Per Equivalent Units (pp. 151)
Materials Conversion
Costs of beginning work in process inventory $10,000 $5,000
Costs added during current period $350,000 $200,000
Total Costs $360,000 $205,000
Equivalent units of production (from above) 3800 3750
Cost per equivalent unit $94.74 $54.67
Now, in order to determine the costs for ending work in process inventory and cost of units completed
and transferred out, the equivalent units under these categories are multiplied by the cost per
equivalent unit (pp. 151). The continuation of the problem above is as follows:
Costs of Ending Work in Process Inventory and the Units Transferred Out (pp. 151)
Materials Conversion Total
Ending work in process inventory:
Materials: $94.74 * 300 $28,421
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Conversion: $54.67 * 250 $13,667 $42,088
Units completed and transferred out:
Materials: $94.74 * 3500 $331,579
Conversion: $54.67 * 3500 $191,333 $522,912
TOTALS $360,000 $205,000 $565,000
Moving on to the cost reconciliation report, the costs assigned to ending work in process inventory to
the units transferred out reconcile with the costs invested in beginning work in process inventory and
the costs to production during the month (pp. 152).
Cost Reconciliation (p. 152)
Costs to be accounted for:
Cost of beginning work in process inventory $15,000
Costs added to production during the period $550,000
Total costs to be accounted for $565,000
Costs accounted for as follows:
Cost of ending work in process inventory $42,088
Cost of units transferred out $522,912
Total cost accounted for $565,000
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