ACCT 130 – Principles of Managerial Accounting
Fall 2023, Section 5 & 6
Handout 4 – Chapter 4 &4A Process Costing
Equivalent units-Weighted Average method
Smith Company reported the following activity in the Assembly Department for the month of
June:
Example 1: Calculate Equivalent units of production - Weighted Average Method.
Materials Conversion Total
Units Completed and transferred out of Department
in June
Work in Process, June 30
Equivalent units of Production in the department
during June
Example 2: Compute and apply costs
Use the formula above to compute the cost per equivalent unit of production.
1
Data:
Beginning work in process: 300 units
Materials: 40% complete $ 6,119
Conversion: 20% complete $ 3,920
Production started during June 6,000 units
Production completed during June 5,400 units
Costs added to production in June
Materials cost $ 118,621
Conversion cost $ 81,130
Ending work in process 900 units
Materials: 60% complete
Conversion: 30% complete
Use the cost per equivalent unit for materials and conversion and assign costs to units in the table
below.
Example 3: Assign Costs to Units
Cost of Ending WIP and Units Transferred Out Materials Conversion Total
Ending WIP inventory:
Equivalents units
Cost per Equivalents units
Cost of Ending WIP inventory
Units completed and transferred out:
Units transferred
Cost per equivalent unit
Cost of units transferred out
Equivalent units-FIFO method
Refer to the data provided for Smith Company above concerning the Assembly Department for
the month of June.
Example 4: Calculate equivalent units of production-FIFO method.
Materials Conversion Total
To complete beginning Work in Process:
Materials
Conversion
Units started and completed during June
Ending Work in Process
Materials
Conversion
Equivalent units of Production
2
Reconcile equivalent units of production with Weighted Average method.
Materials Conversion Total
Equivalent units-weighted average method
Less equivalent units in beginning inventory
Equivalent units- FIFO method
Example 5:
Revisit the data for Smith Company’s Assembly Department for the month of June provided
above. Use the cost per equivalent unit for materials and conversion and assign costs to units in
the table below.
The formula for computing the cost per equivalent unit under FIFO method is:
Materials Conversion Total
Cost of Units Transferred Out:
Cost in beginning WIP inventory
Cost to complete beginning WIP
Equivalent units to complete
Cost per equivalent unit
Cost to complete beginning WIP
Cost of units started and completed:
Units started and completed
Cost per equivalent unit
Cost of units started and completed
Cost of Units Transferred Out
