EQUIVALENT UNITS, UNIT COST, WEIGHTED AVERAGE Fino Linens Inc. manufactures bed and bath linens. The bath linens department sews terry cloth into towels of various sizes. Fino uses the weighted average method. All materials are added at the beginning of the process. The following data are for the bath linens department for August:

Production:

Units in process, August 1, 60 percent complete 20,000 Units completed and transferred out 60,000 Units in process, August 31, 60 percent complete 20,000 Costs:

WIP, August 1 $11,520 Current costs 72,000 Total $83,520 Required:

. Prepare a physical flow analysis for the bath linens department for August.

. Calculate equivalent units of production for the bath linens department for August.

. Calculate the unit cost for the bath linens department for August.

. Show that the cost per unit calculated in Requirement 3 is a weighted average of the cost per equivalent unit in BWIP and the current (FIFO) cost per equivalent unit.

(Hint: The weights are in proportion to the number of units from each source.)

Problem