Question

. Eclypso Inc. manufactures a product that passes through two processes: mixing and molding. All manufacturing costs are added uniformly in the mixing department. Information for the mixing department for October is as follows: Work in process, October 1: Units (45% complete) 7,200 Direct materials $42,000 Direct labor $50,400 Overhead $14,400 During October, 38,400 units were completed and transferred to the molding department. The following costs were incurred by the mixing department during October: Direct materials $144,000 Direct labor $192,000 Overhead $60,000 By October 31,3600 unit that were 85% complete remained in mixing department. Eclypso uses the weighted average method. Eclypso's cost of goods transfered to the molding department during october would be?

Answer 1

Solution:

Cost of goods transferred to the molding department = $463,488

Below is the explanation and working..

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

First of all we need to find out the physical flow of units

Equivalent units of production (EUP) - Weighted Average Method
	Units	% Material	EUP - Material	% Conversion	EUP - Conversion
Units Completed and Transferred Out	38400	100%	38400	100%	38400
Ending Work In Process	3600	100%	3600	85%	3060
Equivalent units of production			42000		41460
Cost per equivalent unit of production
			Materials		Conversion
Cost related to beginning work in process			$42,000		$64,800
Cost incurred during the period			$144,000		$252,000
Total Costs		Costs	$186,000	Costs	$316,800
Equivalent Units of Production		EUP	42000	EUP	41460
Cost per Equivalent Unit of production			$4.43		$7.64

Cost Assignment:
Cost of units transferred out:	EUP	Cost per EUP	Total Cost
Direct materials	38400	$4.43	$170,112
Conversion	38400	$7.64	$293,376
Total costs transferred out			$463,488

Cost of goods transferred to the molding department = $463,488

Note – Cost per Equivalent Unit of Production is rounded to two decimal places. If rounding off is different, then answer will vary.