P4-21 Weighted-Average Method; Analysis of Mlork in Process T-Account Weston Pro
ID: 2600326 • Letter: P
Question
P4-21 Weighted-Average Method; Analysis of Mlork in Process T-Account Weston Products manufactures an industrial cleaning compound that goes through three processing departments-Grinding, Mixing, and Cooking. All raw materials are introduced at the start of work in the Grinding Department, with conversion costs being incurred evenly throughout the grinding process. The Work in Process T-account for the Grinding Department for a recent month is given below: Work in Process-Grinding Department Completed and transferred to mixing (? lbs.) Inventory, May 1 (18,000 lbs., 1/3 processed) 21,800 May costs added: Raw materials (167,000 133,400 226,800 Labor and overhead Inventory, May 31 (15,000 Ibs., 2/3 processed) The May 1 work in process inventory consists of $14,600 in materials cost and $7,200 in labor and overhead cost. The company uses the weighted-average method to account for units and costs. Prepare a production report for the Grinding Department for the month. What criticism can be made of the unit costs that you have computed on your production report? uired 1. 2.Explanation / Answer
1) Completed and transferred units = Opening Inventory+added into production in may-Closing Inventory
= 18,000 lbs+167,000 lbs-15,000 lbs = 170,000 lbs
Equivalent units for opening inventory = 18,000 lbs*2/3 = 12,000 lbs
Equivalent units for closing work in progress = 15,000 lbs*2/3 = 10,000 lbs
Completed units of the month of may (167,000-15,000) = 152,000 lbs.
Total Equivalent units for current month production= 12,000 lbs +10,000 lbs +152,000 lbs = 174,000 lbs
Total equivalent units for opening WIP = 18,000*1/3 = 6,000 lbs
Weighted Average cost = Total cost/Total equivalent units = (21,800+133,400+226,800)/(174,000+6,000)
= $382,000/180,000 lbs = $2.1222222 or 382/180
Work in Process - Grinding Department (Amount in $)
2) In calculating unit costs, the weighted avarage method is used. The weighted average method includes costs in beginning inventory and current period costs to establish an average cost per unit. But this method has also many criticisms such as this method assumes that all units are identical which is not always the case. This method is tedious and requires the issue price to be computed at each time consignment is received.
Particulars Amount Particulars Amount Inventory, May 1 (18,000 lbs., 1/3 processed) 21,800 Completed and transferred to mixing (170,000 lbs) (170,000*382/180) 360,778 May Costs added: Raw materials (167,000 lbs) 133,400 Labor and Overhead 226,800 Less: Inventory, May 31 (15,000 lbs., 2/3 processed) (10,000*382/180) (21,222) Total 360,778 Total 360,778Related Questions
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