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CPAexcel said that for weighted average equivalent units (unlike FIFO), you do NOT include beginning work in process, but then in the answer it adds beginning work in process, or am I reading this wrong?
The following information pertains to Lap Co.’s Palo Division for the month of April:
Number of units Cost of materials
Beginning work in process 15,000 $5,500
Started in April 40,000 18,000
Units completed 42,500
Ending work in process 12,500
All materials are added at the beginning of the process. Using the weighted average method, the cost per equivalent unit for materials is
A. $0.59.
B. $0.55.
C. $0.45.
D. $0.43.
Answer D. Under the weighted average method, the cost per equivalent unit includes all the work done through the end of the current period, including the work performed on beginning inventory during the previous period. This is why the method is called the weighted average method. In this situation, material is added at the beginning of the process. Therefore, all units are considered complete with respect to materials. The costs associated with this effort form the numerator of the calculation.
The sum of units completed plus units in ending inventory equals 55,000 (42,500 + 12,500). The total cost incurred on material equals $23,500 ($5,500 + $18,000). Thus, the cost per equivalent unit for materials is $.43 ($23,500/55,000).
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