Question

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: 210,000 33,000 Units completed Add: Units in EWIP X Fraction complete: (66,000 X 50%) Equivalent units of output (weighted average) Less: Units in 'BWIP X Fraction complete: (50,000 X 60%) 243,000 30.000 213.000 Equivalent units of output (FIFO) The costs that Byford had to account for during the month of November were as follows: $109,000 Beginning work in process Cost 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 Firo. Explain the key differences between the two approaches and make a recommendation to be about which method should be used Previous Next)

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) Weighted Average method is preferable