Question

Weighted Average Method, Unit Cost, Valuing Inventories

Polson Enterprises produces strawberry gelato. Output is measured in quarts. Polson uses the weighted average method. During July, Polson had the following production data:

Units in process, July 1, 60% complete	54,000 quarts
Units completed and transferred out	360,000 quarts
Units in process, July 31, 40% complete	112,500 quarts
Costs:
Work in process, July 1	$81,000
Costs added during July	526,500

Required:

1. Using the weighted average method, calculate the equivalent units for July.
equivalent units

2. Calculate the unit cost for July. Round your answer to the nearest cent.
$per unit

3. Assign costs to units transferred out and EWIP.

Cost of goods transferred out	$
Ending work in process	$

Answer 1

• All working forms part of the answer
• Requirement 1:

Calculation of Equivalent Units using Weighted Average method:

Statement of Equivalent Units
		With respect to cost
	Units	Complete %	Equivalent units
	[A]	[B]	[A x B]
Transferred	360000	100%	360000
Closing WIP	112500	40%	45000
Total	472500	Total	405,000 Equivalent Units

---Equivalent Units = 360,000 (for Units transferred) and 45,000 (for Ending WIP) = 405,000 units.

• Requirement 2: Unit cost based on Equivalent Units

Cost per Equivalent Units
	COST
Beginning WIP Inventory Cost	$          81,000.00
Cost incurred during period	$        526,500.00
Total Cost to be accounted for	$        607,500.00
Total Equivalent Units [calculated in Requirement 1]	405,000
Cost per Equivalent Units	$                1.50

                ---Cost per (Equivalent) Unit = $ 1.50

• Requirement 3:

Assignment of Cost----

>Cost of units transferred = 360,000 Equivalent units x $ 1.50 = $ 540,000

>Cost of Ending Work in Process = 45,000 Equivalent Units x $ 1.50 = $ 67,500