Question

Calculator Weighted Average Method, Unit Costs, Valuing Inventories Byford Inc. produces a product that passes through two processes. During November, equivalent units were calculated using the weighted average method: Units completed 210,000 Add: Units in EWIP X Fraction complete: (66,000 X 50%) 33,000 243,000 Equivalent units of output (weighted average) Less: Units in BWIP X Fraction complete: (50,000 X 60%) Equivalent units of output (FIFO) 30,000 213,000 The costs that bylord had to account for during the month of November were as follows: $109,000 Beginning work in process Costs added 1,519,100 Total $1,628,100 1. Using the weighted average method, determine unit cost. Round to the nearest cent. per unit 2. Under the weighted average method, what is the total cost of units transferred out? What is the cost assigned to units in ending inventory? Cost of units transferred out Cost of ending inventory 3. Johnson, the manager of Byford, is considering switching from weighted average to FIFO. Explain the key differences between the two approaches and make a recommendation to B about which method should be used.

Answer 1

Answer is given below

Cost per equivalent unit ) $6.70 Weighted average method Beginning Work in process Cost added Total Equivalent units Cost per equivalent unit $109,000 $1,519,100 $1,628,100 $243,000 $6.70 Cost of units transferred out Cost of ending inventory $1,407,000 (210,000*$6.70) $221,100 (33,000*$6.70) 3 FIFO method uses the current period cost to divided by equivalent units. It considers the unfinished work on opening inventory Whereas Average cost method uses the total cost (beginning WIP cost + Current cost period) to arrive at cost per equivalent unit Both method gives the same results