Weighted Average Method, FIFO Method, Physical Flow, Equivalent Units

Middelton Company manufactures a product that passes through two processes: Fabrication and Assembly. The following information was obtained for the Fabrication Department for October:

1. All materials are added at the beginning of the process.
2. Beginning work in process had 93,100 units, 20 percent complete with respect to conversion costs.
3. Ending work in process had 18,400 units, 40 percent complete with respect to conversion costs.
4. Started in process, 92,400 units.

Required:

1. Prepare a physical flow schedule.

Middelton Company Physical Flow Schedule

Units to account for:
Started and completedUnits, beginning work in processUnits, ending work in processUnits, beginning work in process	Units, beginning work in process
Units completedUnits, ending work in processUnits startedUnits transferred outUnits started	Units started
Total units to account for	fill in the blank 7f2ffef28050fd8_5
Units accounted for:
Units completed and transferred out:
Started and completedUnits completedUnits startedUnits transferred outStarted and completed	Started and completed
From beginning work in processUnits completedUnits startedUnits transferred outFrom beginning work in process	From beginning work in process
Units completedUnits, ending work in processUnits startedUnits transferred outUnits, ending work in process	Units, ending work in process
Total units accounted for	fill in the blank 7f2ffef28050fd8_12

Feedback

1. The physical flow schedule traces the units in process regardless of their stage of completion and provides the information needed for preparing the equivalent units schedule.

2. Compute equivalent units using the weighted average method.

Weighted average method:	Equivalent Units
Direct Materials	fill in the blank a4d2bc022063fd9_1
Conversion Costs	fill in the blank a4d2bc022063fd9_2

3. Compute equivalent units using the FIFO method.

FIFO method:	Equivalent Units
Direct Materials	fill in the blank a4d2bc022063fd9_3
Conversion Costs	fill in the blank a4d2bc022063fd9_4

Feedback

2. To calculate equivalent units, weighted average counts prior-period output in BWIP as belonging to the current period. So all completed units are treated as output of the current period.

3. FIFO treats the work (equivalent output) in BWIP as belonging to the prior period and only counts the work (equivalent output for each input) done this period as part of this period's output.

4. Suppose that the cost of direct materials in beginning work in process is $647,000 and that the direct materials cost incurred for October is $797,200. With these changes, answer the following:

a. What is the unit materials cost for the units in BWIP? Round your answers to the nearest cent. $fill in the blank 770b6801c07f026_1

b. What is the unit materials cost for units produced in October? Round your answers to the nearest cent. $fill in the blank 770b6801c07f026_2

Which method should be used to answer this question?

Weighted AverageFIFOWeighted Average

Explain why the unit materials cost is not the same for weighted average and FIFO.

Of the two unit calculations,

Weighted AverageFIFOFIFO

uses only October costs and October output, so it

shouldshould notshould

be used to calculate the unit materials cost for October. When those costs are changing from one period to the next, then the unit costs for FIFO and WA

willwill notwill

differ.

As part of your explanation, show that the weighted average unit cost for materials is the blend of the September unit materials cost and the October unit materials cost.

Because the weights are the

distributionproportioncomparisonproportion

of total equivalent units for each unit cost.

c. Which data analytic types (descriptive, diagnostic, predictive, or prescriptive) apply for 4a and 4b? Note: More than one data analytic type might apply. (See Exhibit 2.5 and Exhibit 2.6 for a review of data analytic metrics.)

Calculating what the unit materials cost is for September is

descriptivediagnosticpredictiveprescriptivedescriptive

. Identifying the method that should be used for calculating October's unit materials cost is

descriptivediagnosticpredictiveprescriptiveprescriptive

. Explaining why the two unit costs differ and showing how the Weighted Average method is a blend of BWIP and current cost is

descriptivediagnosticpredictiveprescriptivediagnostic

.