Question 2 WEIGHTED AVERAGE METHOD, NONUNIFORM INPUTS, MULTIPLE DEPARTMENTS (LO
ID: 2550469 • Letter: Q
Question
Question 2
WEIGHTED AVERAGE METHOD, NONUNIFORM INPUTS, MULTIPLE DEPARTMENTS (LO 1, 2, 3, 4)
Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: Picking, Encapsulating, and Bottling. In Picking, the ingredients for the cold capsules are measured, sifted, and blended. The mix is transferred out in litre containers. The encapsulating department takes the powdered mix and places it in capsules. One litre of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to Bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules.
During March, the following results are available for the first two departments:
Picking Encapsulating
Beginning inventories:
Physical units 10 litres 4,000
Costs:
Materials $252 $32
Labour $282 $20
Overhead ? ?
Transferred in - $140
Current production:
Transferred out 140 litres 208,000
Ending inventory 20 litres 6,000
Costs:
Materials $3,636 $1,573
Transferred in
Labour $4,618 $1,944
Overhead ? ?
Percentage of completion:
Beginning inventory 40% 50%
Ending inventory 50% 40%
Overhead in both departments is applied as a percentage of direct labour costs. In the picking department, overhead is 200 percent of direct labour. In the encapsulating department, the overhead rate is 150 percent of direct labour.
Required:
1. Prepare a production report for the picking department using the weighted average method. Follow the five steps outlined in the chapter. Round to two decimal places for the unit cost.
2 Prepare a production report for the encapsulating department using the weighed average method Follow the five steps outlined in the chapter. Round to four decimal places for the unit cost.
3 Explain why the weighted average method is easier to use than FIFO Explain when weighted average will give about the same results as FIFO.
Explanation / Answer
1)
3) It is easier to use the Weighted Average method (WAM) than FIFO because in WAM there is no difference between the opening stock and the stock produced in the present period. An average cost of opening stock and costs incurred in the current period is used to value the transferred out units and closing WIP.
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Picking department: Phy units Mat lab o/h total OWIP 10 10 10 10 Started and comple 130 130 130 130 transf out 140 CWIP 20 20 10 10 Equivalent units 160 150 150 total costs: OWIP 252 282 564 Incurred during month 3636 4618 9236 total costs: 3888 4900 9800 cost per Equi unit 24.3 32.67 65.33 Cost of Transf.Out (140 units) 3402 4573.33 9146.67 17122 Cost of CWIP 486 326.67 653.33 1466 2) Encapsulating department: Phy units Tranf in Mat lab o/h total OWIP 4000 4000 4000 4000 4000 Started and comple 204000 204000 204000 204000 204000 transf out 208000 CWIP 6000 6000 6000 2400 2400 Equivalent units 214000 214000 210400 210400 total costs: OWIP 140 32 20 30 Incurred during month 17122 1573 1944 2916 total costs: 17262 1605 1964 2946 cost per Equi unit 0.08 0.01 0.01 0.01 Cost of Transf.Out (208000 units) 16778 1560 1942 2912 23192 Cost of CWIP 484 45 22 34 585Related Questions
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