Question

Cost Information and the Weighted Average Method

Morrison Company had the equivalent units schedule and cost information for its Sewing Department for the month of December, as shown below.

	Direct Materials				Conversion Costs
Units completed		46,000				46,000
Add: Units in ending work in process ×
Percentage complete:
10,000 × 100% direct materials		10,000				—
10,000 × 40% conversion materials		—				4,000
Eqivalent units of output		56,000				50,000
Costs:
Work in process, December 1:
Direct materials						$66,000
Conversion costs						11,000
Total work in process						$77,000
Current costs:
Direct materials						$550,000
Conversion costs						182,000
Total current costs						$732,000

Required:

1. Calculate the unit cost for December, using the weighted average method. Round interim calculations to the nearest cent and, if required, round your answer to the nearest cent.
$ per equivalent unit

2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for. Round interim calculations to the nearest cent and, if required, round your answer to the nearest dollar.

Cost of goods transferred out:

Units completed	$
Cost of EWIP
Total costs assigned (accounted for)	$

Reconciliation
  Cost to account for:

BWIP	$
Current (December)
Total	$

3. What if you were asked to show that the weighted average unit cost for materials is the blend of the November unit materials cost and the December unit materials cost? The November unit materials cost is $6.60 ($66,000 / 10,000), and the December unit materials cost is $11.96 ($550,000 / 46,000). The equivalent units in BWIP are 10,000, and the FIFO equivalent units are 46,000. Calculate the weighted average unit materials cost using weights defined as the proportion of total units completed from each source (BWIP output and current output). Round interim calculations to the nearest cent and, if required, round your answer to the nearest cent.

Answer 1

			Equivalent units
	Units accounted for	Physical unit	Material	Conversion
	Units completed and transferred out	46000	46000	46000
	Units in ending WIP inventory	10000	10000	4000	Materaials100%	Conversion40%
	Total units accounted for	56000	56000	50000
	Summery of costs to be accounted for
	Costs to be accounted for	Materials	Convesrion	Total
	Cost in beginning WIP	$66,000	$11,000	$77,000
	Costs incurred during the period	$550,000	$182,000	$732,000
	Total costs to be accounted for	$616,000	$193,000	$809,000
	Calculation of costs per equivalent unit
		Materials	Conversion
	Total costs to be accounted for(a)	$616,000	$193,000
	Total equivalent units accounted for(b)	56000	50000
	Cost per equivalent unit(a)/(b)	$11.00	$3.86
	Assign costs to units transferred out and in Ending WIP
		Materials	Conversion	Total
*	Costs assigned to units transferred out	$506,000	$177,560	$683,560
**	Cost assigned to ending WIP	$110,000	$15,440	$125,440
				$809,000
*	Materials Costs assigned to transferred out units	$506,000	(46000*$11.00)
*	Conversion Cost assigned to transferred out units	$177,560	(46000*$3.86)
	Total Cost of units transferred out	$683,560
**	Materials Costs assigned to Ending WIP	$110,000	(10000*$11.00)
**	Conversion Cost assigned to Ending WIP	$15,440	(4000*$3.86)
	Total Cost of Ending WIP	$125,440