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	$6,804	5,400	65%
+ Cost of units					Units transferred out	$82,364	62,100	100%
transferred in	$60,903	60,300
+ Direct Labor	$10,400
+ Factory Overhead	$5,928
applied
End Inventory:	$1,671	3,600	35%

Inventory in process, July 1, 5,400 units (65% complete)	$	6,804
Direct materials cost incurred in July, 60,300 units		60,903
Direct labor cost incurred in the period		10,400
Factory overhead applied in the period		5,928
Total production costs to account for	$	84,035

62,100 units were completed and transferred out

3,600 units remain in WIP, 35% complete

Total whole units to account for:
Units transferred out		62,100		Beginning inventory		5,400
Ending inventory		3,600		Units transferred in		60,300
		65,700				65,700
Equivalent units:
Completed units		62,100
Ending WIP x 35%		1,260
		63,360

Cost per equivalent unit:

$84,035 / 63,360 = $1.32631

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	$5,310	$60,903	$66,213		62,100			$
Conversion costs	$1,494	$16,328	$17,822		62,100			$
	$6,804	$77,231	$84,035					$1.2891

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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	$	10,656	$	19,536
Conversion costs		28,182		60,756
Total costs	$	38,838	$	80,292

Gallons of fortified milk beverage in process on July 1 (15% complete)*	16,700
Gallons of fortified milk beverage completed and transferred out during July	31,400
Gallons of fortified milk beverage in process on July 31 (40% complete)*	13,000
*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	$10,656	$19,536	$	31,400			$
Conversion costs	28,182	60,756		31,400			$
	$38,838	$80,292	$				$

Calculate the cost of:

Completed units: $

Ending WIP: $