Question

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Exercise 3-4 Weighted average: Equivalent units computed LO C2 The production department in a process manufacturing system completed 279,000 units of product and transferred them to finished goods during a recent period of these units, 59,000 were in process at the beginning of the period. The other 220,000 units were started and completed during the period. At period end, 39,000 units were in process. Prepare the department's equivalent units of production with respect to direct materials under each of three separate assumptions using the weighted average method for process costing Equivalent Units of Production (EUP)-Weighted Average Method 1. All direct materials are added to products when processing begins. Iloits Units 0 Material EUP % Materials Materials Total EUP 2. Beginning inventory is 40% complete as to materials and conversion costs. Ending inventory is 75% complete as to materials and conversion costs. EUP Units % Materials Materials Total EUP 3. Beginning inventory is 60% complete as to materials and 40% complete as to conversion costs. Ending inventory is 30% complete as to materials and 60% complete as to conversion costs. EUP Units % Materials Materials Total EUP

Answer 1

Under weighted average method, equivalent units are to be calculated only for units completed & transferred out and units lying as ending work in process as it is assumed that the units once entered into the process become integral part of total units and no segregation between units transferred from beginning work in process and introduced during current process. Conversion cost includes Labor + Overheads. So, Physical units of production: Units completed and transferred out Add: Units in ending inventory Less: Units in beginning inventory Units started during current period 279,000 39,000 -59,000 259,000 1) Particulars Whole Units Completed and transferred Ending work in process Equivalent Units of Production (EUP) 279,000 39,000 318,000 Materials 100% 100% EUP- Materials 279,000 39,000 318,000 [279000 units x 100% [39000 units x 100% [279000 + 39000] NOTE: As the materials are added at the beginning of the process itself, % of completion for materials will be 100% in ending inventory.

2) Particulars Whole Units Completed and transferred Ending work in process Equivalent Units of Production (EUP) 279,000 39,000 318,000 Materials 100% 75% EUP- Materials 279,000 29,250 308,250 [279000 units x 100% [39000 units x 75% [279000 + 29250] Particulars Whole Units Completed and transferred Ending work in process Equivalent Units of Production (EUP) 279,000 39,000 318,000 Materials 100% 30% EUP- Materials 279,000 11,700 290,700 [279000 units x 100% [39000 units x 30% [279000 + 11700]