Process Costing using Weighted Average

Process Costing using Weighted Average

Timberline Associates uses the weighted-average method in its process costing system. The following data are for the first processing department for a recent month:

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Work in process, beginning:
Units in process ……………………………………………….. 2,400

Percent complete with respect to materials ………….. 75%

Percent complete with respect to conversion ……….. 50%

Costs in the beginning inventory:
Materials cost ………………………………………………….. $8,400

Conversion cost ……………………………………………….. $7,200

Units started into production during the month………..$20,800

Units completed and transferred out ……………………… $22,200

Costs added to production during the month:

Materials cost ………………………………………………….. $97,400

Conversion cost ……………………………………………….. $129,600

Work in process, ending:

Units in process ……………………………………………….. 1,000

Percent complete with respect to materials ………….. 80%

Percent complete with respect to conversion ……….. 60%

Required:

  1. Determine the equivalent units of production.
  2. Determine the costs per equivalent unit.
  3. Determine the cost of ending work in process inventory.
  4. Determine the cost of the units transferred to the next department.

 

Part E: Activity-Based Costing

Welk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, H16Z and P25P, about which it has provided the following data:

H16Z       P25P

Direct materials per unit …………….$10.20     $50.50

Direct labor per unit …………………. $8.40      $25.20

Direct labor-hours per unit ………… 0.40.       1.20

Annual production…………………….30,000      10,000

The company’s estimated total manufacturing overhead for the year is $1,464,480 and the company’s estimated total direct labor-hours for the year is 24,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

Activities and Activity Measures                             Estimated Overhead Cost

Supporting direct labor (DLHs)……………..                    $ 552,000

Setting up machines (setups) …………………                    132,480

Parts administration (part types) …………….                    780,000

Total …………………………………………………..                  $1,464,480

                                                      H16Z      P25P     Total

Supporting direct labor ……      12,000    12,000   24,000

Setting up machines ………..       864         240        1,104

Parts administration ………..       600          960        1,560

 

Required:

  1. Determine the manufacturing overhead cost per unit of each of the company’s two products under the traditional costing system.
  2. Determine the manufacturing overhead cost per unit of each of the company’s two products under activity-based costing system.

 

 

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