47. (WA and FIFO) Rainbow Paints makes quality paint sold at premium prices in one production department. Production begins with the blending of various chemicals, which are added at the beginning of the process, and ends with the canning of the paint. Canning occurs when the mixture reaches the 90 percent stage of completion. The gallon cans are then transferred to the Shipping Department for crating and shipment. Labor and overhead are added continuously throughout the process. Factory overhead is applied at the rate of $3 per direct labor hour.

Prior to May, when a change in the process was implemented, work in process inventories were insignificant. The change in process enables greater production but results in large amounts of work in process. The company has always used the weighted average method to determine equivalent production and unit costs. Now, production management is considering changing from the weighted average method to the first-in, first-out method.

The following data relate to actual production during May:

Costs for May Work in process inventory, May 1 Direct material—chemicals $ 45,600 Direct labor ($10 per hour) 6,250 Factory overhead 1,875 Current month Direct material—chemicals $228,400 Direct material—cans 7,000 Direct labor ($10 per hour) 35,000 Factory overhead 10,500 Units for May (Gallons)

Work in process inventory, May 1 (25% complete) 4,000 Sent to Shipping Department 20,000 Started in May 21,000 Work in process inventory, May 31 (80% complete) 5,000

a. Prepare a cost of production report for each cost element for May using the weighted average method.

b. Prepare a cost of production report for each cost element for May using the FIFO method.

c. Discuss the advantages and disadvantages of using the weighted average method versus the FIFO method, and explain under what circumstances each method should be used.