ECONOMICS

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COST ACCOUNTING

PROCESS COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Boswal Company uses the weighted-average method in its process costing system. The Assembly Department started the month with 6, 000 units in its beginning work in process inventory that were 80% complete with respect to conversion costs. An additional 52, 000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 18, 000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month?
A
43, 600
B
40, 000
C
38, 800
D
64, 000
Explanation: 

Detailed explanation-1: -To use the weighted average model, one divides the cost of the goods that are available for sale by the number of those units still on the shelf. This calculation yields the weighted average cost per unit-a figure that can then be used to assign a cost to both ending inventory and the cost of goods sold.

Detailed explanation-2: -When the weighted-average method of process costing is used, a department’s equivalent units are computed by: Adding the units transferred out to the equivalent units in ending inventory. These will be the beginning work in Process for this period.

Detailed explanation-3: -The first-in-first-out (FIFO) method keeps beginning inventory costs separate from current period costs and assumes that beginning inventory units are completed and transferred out before the units started during the current period are completed and transferred out.

Detailed explanation-4: -How could a firm using the weighted average method of process costing calculate how many units were started during a period? Subtract beginning units in inventory from units completed, then add ending units in inventory.

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