Question

Cliff Company manufactures file cabinets. The following cost information is available for the month of December:

Beginning work in process
Direct materials	$	42,000
Conversion cost		53,000
December costs
Direct materials		75,000
Conversion cost		113,000

Cliff had 8,600 equivalent units of direct materials and 5,100 equivalent units of conversion cost.

Using the weighted-average method, calculate Cliff’s cost per equivalent unit for materials and conversion during December. (Round your answers to 2 decimal places.)

Answer 1

Weighted Average (Average Cost) Method

Physical Units Count

Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.

Cost Accounted for:

- The cost of opening work-in-progress and cost of the current period are aggregated and the aggregate cost is divided by output in terms of completed equivalent units.

- The units of Beginning Inventory of WIP and their cost are taken in full under this method

Calculation of Cost per Equivalent Units for Materials and Conversion

	Materials	Conversion
beginning work in process cost	$42,000	$53,000
Cost added during period	$75,000	$113,000
Total Costs	$117,000	$166,000
Divide by: Equivalent Units	8,600	5,100
Cost per Equivalent Unit	$13.60	$32.55

Cost per equivalent unit for materials = $13.60

Cost per equivlanet unit for conversion = $32.55