Builder Products, Inc., uses the weighted-average method in its process costing

Question

Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: Production data: Pounds in process, May 1 materials 1008 complete; rsion 90% complete 63,000 280,000 Pounds started into production during May Pounds completed and transferred out Pounds in process, May 31; materials 75% complete ; conversion 25% complete 23,000 Cost data: Nork in process inventory, May 1: Materials cost Conversion cost Cost added during May Materials cost Conversion cost $67,500 $ 29,100 $350, 690 $159, 835 Required: 1. Compute the equivalent units of production for materials and conversion for May. 2. Compute the cost per equivalent unit for materials and conversion for May. 3. Compute the cost of ending work in process inventory for materials, conversion, and in total for May. 4. Compute the cost of units transferred out to the next department for materials, conversion, and in total for May. 5. Prepare a cost reconciliation report for May. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute the equivalent units of production for materials and conversion for May. Equivalent units of production

Explanation / Answer

Solution:

Weighted Average (Average Cost) Method

Physical Units Count

Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.

Cost Accounted for:

- The cost of opening work-in-progress and cost of the current period are aggregated and the aggregate cost is divided by output in terms of completed equivalent units.

- The units of Beginning Inventory of WIP and their cost are taken in full under this method

Ending Inventory

The Ending Inventory of WIP is valued at total cost i.e. Cost added during the month/period and Cost of Beginning WIP.

Part 1 – Equivalent unit of production for material and conversion

Weighted Average Method:

Equivalent Units of Production

Materials

Conversion

Units Completed & transferred Out to the next department

263300

263300

Equivalent Units in ending work in process Inventory

Materials (23,000 Units x 75% Complete)

17250

Conversion (23,000 Units x 25% Complete)

5750

Equivalent Units of Production

280550

269050

Part 2 – Cost per Equivalent Unit

Cost per Equivalent Unit

Materials

Conversion

Cost of beginning work in process inventory

$67,500

$29,100

Costs added during the period

$350,690

$159,835

Total Cost

$418,190

$188,935

Equivalent Units of Production

280550

269050

Cost per equivalent unit

$1.49

$0.70

Part 3 – Cost of Ending Work in Process

Materials

Conversion

Total

Ending work in process inventory

Equivalent units

17250

5750

Cost per equivalent unit

$1.49

$0.70

Cost of ending work in process inventory

$25,702.50

$4,025.00

$29,727.50

Part 4 – Cost of Units Transferred out

Cost of Units completed and transferred out

Materials

Conversion

Total

Equivalent units

263300

263300

Cost per equivalent unit

$1.49

$0.70

Cost of units transferred out

$392,317.00

$184,310.00

$576,627.00

Part 5 – Cost reconciliation report for May

Costs to be accounted for:

Cost of Beginning work in process (67500 + 29100)

$96,600.00

Cost added to production during the period (350690 + 159835)

$510,525.00

Total Cost to be accounted for

$607,125.00

Costs accounted for as follows:

Cost of Units Completed and Transferred Out

$576,627.00

Cost of Ending work in process inventory

$29,727.50

Total Cost accounted for

$606,354.50

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Weighted Average Method:

Equivalent Units of Production

Materials

Conversion

Units Completed & transferred Out to the next department

263300

263300

Equivalent Units in ending work in process Inventory

Materials (23,000 Units x 75% Complete)

17250

Conversion (23,000 Units x 25% Complete)

5750

Equivalent Units of Production

280550

269050

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