Production costs are assigned to the units transferred out of WIP and to the units in ending WIP by multiplying the equivalent units by the per-unit cost. The following steps are involved:

1. Compute the equivalent units of production

2. Determine the cost per equivalent unit

3. Assign costs to ending WIP and cost of goods transferred out

Consider the T account showing the detail costs and units in the Mixing Dept using the weighted average costing method.

Work in Process-Mixing Dept
	$Amt	#units	%completed			$Amt	#units	%completed
Beg Inventory	$6,336	4,800	70%
+ Cost of units					Units transferred out	$92,686	62,200	100%
transferred in	$69,805	60,700
+ Direct Labor	$10,600
+ Factory Overhead	$7,420
applied
End Inventory:	$1,475	3,300	30%

Inventory in process, July 1, 4,800 units (70% complete)	$	6,336
Direct materials cost incurred in July, 60,700 units		69,805
Direct labor cost incurred in the period		10,600
Factory overhead applied in the period		7,420
Total production costs to account for	$	94,161

62,200 units were completed and transferred out

3,300 units remain in WIP, 30% complete

Total whole units to account for:
Units transferred out		62,200		Beginning inventory		4,800
Ending inventory		3,300		Units transferred in		60,700
		65,500				65,500
Equivalent units:
Completed units		62,200
Ending WIP x 30%		990
		63,190

Cost per equivalent unit:

$94,161 / 63,190 = $1.49013

Note that the number of whole units used to calculate equivalent units (completed units + equivalent units in ending WIP) agrees with the number of whole units in - Select your answer -completed units and units transferred incompleted units and beginning WIPbeginning WIP and units transferred inCorrect 1 of Item 1. Another important point is that - Select your answer -only current period materialonly current period laborall materialallCorrect 2 of Item 1 costs incurred are used in the cost per unit calculation when the weighted average costing method is used.

Fill in the formula for calculating cost per unit:

	- Select your answer -Current period material costsCurrent period conversion costsCurrent period material and conversion costsTotal production costs (including beginning WIP costs)Correct 3 of Item 1
Cost per unit formula =
	- Select your answer -Units started and completedEquivalent units of outputEquivalent units in ending WIPEquivalent units in ending WIP less equivalent units in beginning WIPCorrect 4 of Item 1

What if ending WIP is 30% complete and production costs are the same? Select if the below statements are True or False.

The value of ending WIP would increase and the cost of goods transferred out would decrease by the same amount.	- Select your answer -TrueFalseCorrect 5 of Item 1
The cost per equivalent unit would decrease because the same cost is spread over more units.	- Select your answer -TrueFalseCorrect 6 of Item 1
The value of ending WIP and the value of the cost of goods transferred out will stay the same.	- Select your answer -TrueFalseCorrect 7 of Item 1

This example assumes that materials and conversion costs are added to the process evenly. When materials and conversion costs are added at different times in a process, the equivalent units for materials may be different than the equivalent units for conversion costs. For example, if materials are added at the beginning of a process, the units may be 100% complete for materials and unfinished for labor and overhead.

Fill in the schedule to show how the calculation changes when materials are added at the beginning of the Mixing Dept in the above example. (The cost of beginning WIP, split between materials and conversion costs, is provided.) Round cost per unit to four decimal places.

	Cost				Equivalent Units
	Beginning WIP	Current Period	Total		Completed Units	Ending WIP	Total	Cost per unit
Materials	$4,940	$69,805	$74,745		62,200			$
Conversion costs	$1,396	$18,020	$19,416		62,200			$
	$6,336	$87,825	$94,161					$1.4484

Valuing WIP inventory using the Weighted Average Method:

Hennessey Manufacturing produces fortified milk beverages in a production process whereby units are indistinguishable from one another. Therefore, the company uses process costing to calculate the cost of its products and also employs the weighted average method in its calculations.

The following information is available for July:

	Beginning work in process		Current period
Materials	$	10,176	$	20,352
Conversion costs		27,761		59,041
Total costs	$	37,937	$	79,393

Gallons of fortified milk beverage in process on July 1 (10% complete)*	15,700
Gallons of fortified milk beverage completed and transferred out during July	31,400
Gallons of fortified milk beverage in process on July 31 (70% complete)*	11,000
*All materials are added at the beginning of the process.

Fill in the calculation of cost per unit and the following proof using the weighted average method. Round cost per unit to two decimal places.

Calculation of cost per unit
Cost element	Opening WIP value	Current period cost	Total cost	Completed units	WIP equivalent units	Total equivalent units	Cost per unit
Materials	$10,176	$20,352	$	31,400			$
Conversion costs	27,761	59,041		31,400			$
	$37,937	$79,393	$				$

Calculate the cost of:

Completed units: $

Ending WIP: $