Blueprint Problem: Weighted-average process costing

APPLY THE CONCEPTS: Step 1

Analyze the physical flow for In the Doghouse In the Doghouse produces wooden doghouses with shingled roofs. At the beginning of May, there were 500 units in BWIP with costs of $19,132. During the month, the company completed work on the BWIP and began production on 1,100 units. In the Doghouse incurred $88,020 in manufacturing costs during May. At the end of the month, 200 units of those started during the month were in EWIP. In the table to the below, account for the units for May.

Physical flow for May

Completed from BWIP _______?_____

Started and completed ______?______

Total units completed _______?_____

EWIP _______?_____

Total units accounted for ______?______

Step 2: Calculate the Equivalent Units for the Period The units in BWIP and EWIP are not 100% complete. This step allows BWIP and EWIP to be stated in terms of completed units, which are called equivalent units. This step must be completed before the cost per unit can be calculated.

Under the weighted average method, BWIP is considered to be started and completed during the period when calculating equivalent units. Therefore, BWIP units are included at 100%. Under the FIFO method, the BWIP units are measured by the percentage of work required to complete those units. Therefore, the percentage of work that needs to be done to complete the units must be multiplied by the number of units in BWIP.

APPLY THE CONCEPTS: Step 2 Using the data from above, calculate the Equivalent Units for May. (Note: In the Doghouse?s production manager has estimated that the units in BWIP were 80% complete at the beginning of May. The BWIP units were completed during the month. That is, 20% of the work to complete the units was done in the current period (100% ? 80% = 20%). The manager has also estimated that EWIP was 40% complete at the end of month. Refer to the analysis of the physical flow.)

Equivalent units for May	Weighted average FIFO	FIFO
BWIP	_______?_____	______?______
Units started and completed	_____?_______ _______?___	______?______
EWIP	_____?_______ _______?___	______?______
May equivalent units	______?______ _______?___	______?______

Step 3: Compute the Cost per Equivalent Unit

The calculation for cost per equivalent unit is a simple calculation:

Manufacturing Costs

----------------------------------

Equivalent Units

Under the weighted average method, the numerator is the sum of the manufacturing costs in BWIP and the manufacturing costs for the period. Under the FIFO method, the beginning inventory costs are excluded from this calculation. The numerator is the manufacturing costs for the current period only. Equivalent units for the period were computed in step 2.

APPLY THE CONCEPTS: Step 3 Recall that the BWIP had costs of $19,132. During May, In the Doghouse incurred $88,020 in manufacturing costs. Complete the formula and cost per equivalent unit for the weighted average method and for the FIFO method to the below. If required, round the cost per equivalent unit amount to the nearest cent.

Compute the Weighted Average Cost per Equivalent Unit for May

Weighted Average Cost $_____?______

--------------------------------------

per Equivalent Unit = _____?______

=$_______?________

Compute the FIFO Cost per Equivalent Unit for May

FIFO Cost $_____?______ -------------------------------------- per Equivalent Unit = _____?______ =$________?_______

Step 4: Valuation of Inventories In this step, the cost of the units transferred out of the current process to Finished Goods is computed by using the information calculated in steps 2 and 3.

Recall that the weighted average method assumes that BWIP units are started and completed during the current period. Because of this assumption, BWIP costs were included in the cost per equivalent unit. Therefore, costs transferred out (to Finished Goods) are calculated by multiplying the units started and completed (step 2) times the weighted average cost per equivalent unit (step 3).

The FIFO method requires the BWIP equivalent units to be added to the units started and completed to determine the units transferred out (step 2). These units are multiplied times the FIFO cost per equivalent unit (step 3). This amount is added to the costs in BWIP to determine the costs transferred out (to Finished Goods). If required, round the cost per equivalent unit amounts to the nearest cent.

APPLY THE CONCEPTS: Step 4

Valuation of Inventories for May

Inventory Valuation Weighted Average FIFO

Finished Goods:

BWIP equivalent units ________?________

Started and completed ________?_______ ________?________

Units transferred out ________?_______

x Cost per equivalent unit $_______?________ $________?_______

$________?_______ $_______?________

+ BWIP costs $_______?________

Costs transferred out ________?_______ ________?_______

EWIP:

EWIP equivalent units ________?_______ _______?________

x Cost per equivalent unit $_______?________ $______?_________

Costs in EWIP $________?_______ $_______?________

Step 5: Cost Reconciliation The purpose of cost reconciliation is to confirm that costs have been fully allocated to inventories. The total costs to account for are the sum of the costs in BWIP and the manufacturing costs for the period. This sum is reconciled by showing that it has been allocated to Finished Goods (units transferred out) and EWIP.

APPLY THE CONCEPTS: Step 5 Cost Reconciliation for May

Weighted Average FIFO

Cost to account for:

Cost in BWIP $________?________ $______?__________

Manufacturing costs during May_____?__________ _________?_______

Total costs to accounts for $________?_______ $_______?________

Cost reconciliation:

Costs transferred out $_______?________ $_______?________

Cost in EWIP _______?________ _________?______

Total Costs accounted for $_______?________ $________?_______

Blueprint Problem: Weightedaverage process costing APPLY THE CONCEPTS: Step 1 Analyze the physical flow for In the Doghouse In the Doghouse produces wooden doghouses with shingled roofs. At the beginning of May, there were 500 units in BWIP with costs of $19,132. During the month, the company completed work on the BWIP and began production on 1,100 units. In the Doghouse incurred $88,020 in manufacturing costs during May. At the end of the month, 200 units of those started during the month were in EWIP. In the table to the below, account for the units for May. Physical flow for May Completed from BWIP _______?_____ Started and completed ______?______ Total units completed _______?_____ EWIP _______?_____ Total units accounted for ______?______ Step 2: Calculate the Equivalent Units for the Period The units in BWIP and EWIP are not 100% complete. This step allows BWIP and EWIP to be stated in terms of completed units, which are called equivalent units. This step must be completed before the cost per unit can be calculated. Under the weighted average method, BWIP is considered to be started and completed during the period when calculating equivalent units. Therefore, BWIP units are included at 100%. Under the FIFO method, the BWIP units are measured by the percentage of work required to complete those units. Therefore, the percentage of work that needs to be done to complete the units must be multiplied by the number of units in BWIP. APPLY THE CONCEPTS: Step 2 Using the data from above, calculate the Equivalent Units for May. (Note: In the Doghouse's production manager has estimated that the units in BWIP were 80% complete at the beginning of May. The BWIP units were completed during the month. That is, 20% of the work to complete the units was done in the current period (100% - 80% = 20%). The manager has also estimated that EWIP was 40% complete at the end of month. Refer to the analysis of the physical flow.) Equivalent units for May Weighted average FIFO BWIP _______?_____ Units started and completed EWIP FIFO ______?______ _____?_______ _______?___ ______?______ _____?_______ _______?___ ______?______ May equivalent units ______?______ _______?___ ______?______ Step 3: Compute the Cost per Equivalent Unit The calculation for cost per equivalent unit is a simple calculation: Manufacturing Costs Equivalent Units Under the weighted average method, the numerator is the sum of the manufacturing costs in BWIP and the manufacturing costs for the period. Under the FIFO method, the beginning inventory costs are excluded from this calculation. The numerator is the manufacturing costs for the current period only. Equivalent units for the period were computed in step 2. APPLY THE CONCEPTS: Step 3 Recall that the BWIP had costs of $19,132. During May, In the Doghouse incurred $88,020 in manufacturing costs. Complete the formula and cost per equivalent unit for the weighted average method and for the FIFO method to the below. If required, round the cost per equivalent unit amount to the nearest cent. Compute the Weighted Average Cost per Equivalent Unit for May Weighted Average Cost $_____?______ per Equivalent Unit = _____?______ =$_______?________ Compute the FIFO Cost per Equivalent Unit for May FIFO Cost $_____?______ per Equivalent Unit = _____?______ =$________?_______ Step 4: Valuation of Inventories In this step, the cost of the units transferred out of the current process to Finished Goods is computed by using the information calculated in steps 2 and 3. Recall that the weighted average method assumes that BWIP units are started and completed during the current period. Because of this assumption, BWIP costs were included in the cost per equivalent unit. Therefore, costs transferred out (to Finished Goods) are calculated by multiplying the units started and completed (step 2) times the weighted average cost per equivalent unit (step 3). The FIFO method requires the BWIP equivalent units to be added to the units started and completed to determine the units transferred out (step 2). These units are multiplied times the FIFO cost per equivalent unit (step 3). This amount is added to the costs in BWIP to determine the costs transferred out (to Finished Goods). If required, round the cost per equivalent unit amounts to the nearest cent. APPLY THE CONCEPTS: Step 4 Valuation of Inventories for May Inventory Valuation Finished Goods: BWIP equivalent units Started and completed Units transferred out x Cost per equivalent unit Weighted Average FIFO ________?________ ________?_______ ________?________ ________?_______ $_______?________ $________?_______ $________?_______ $_______?________ + BWIP costs $_______?________ Costs transferred out________?_______ ________?_______ EWIP: EWIP equivalent units ________?_______ _______?________ x Cost per equivalent unit $_______?________ $______?_________ Costs in EWIP $________?_______ $_______?________ Step 5: Cost Reconciliation The purpose of cost reconciliation is to confirm that costs have been fully allocated to inventories. The total costs to account for are the sum of the costs in BWIP and the manufacturing costs for the period. This sum is reconciled by showing that it has been allocated to Finished Goods (units transferred out) and EWIP. APPLY THE CONCEPTS: Step 5 Cost Reconciliation for May Weighted Average Cost to account for: Cost in BWIP $________?________ Manufacturing costs during May_____?__________ Total costs to accounts for $________?_______ FIFO $______?__________ _________?_______ $_______?________ Cost reconciliation: Costs transferred out$_______?________ $_______?________ Cost in EWIP _______?________ _________?______ Total Costs accounted for $_______?________ $________?_______