Question
Problem 1. Weighted-average method, assigning costs.
Tomlinson Corporation is a biotech company based in Milpitas. It makes a cancer-treatment drug in a single processing department.
Direct materials are added at the start of the process. Conversion costs are added evenly during the process. Tomlinson uses the
weighted-average method of process costing. The following information for July 2020 is available.
Work in process, July 1
Started during July
Completed and transferred out during July
Work in process, July 31
Physical
Units
8.700ª
34.500
32.000
11.2000
a Degree of completion: direct materials, 100%; conversion costs, 25%.
• Degree of completion: direct materials, 100%; conversion costs, 70%.
Equivalent Units
Direct
Conversion
Materials
Costs
8,700
2,175
32,000
11.200
32,000
7.840
Total Costs for July 2020
Work in process, beginning
Direct materials
Conversion costs
$61.500
43.200
$104.700
Direct materials added during July
301,380
Conversion costs added during July
498,624
Total costs to account for
$904,704
1. Calculate the cost per equivalent unit for direct materials and conversion costs.
2. Summarize the total costs to account for and assign them to units completed (and transferred out) and to units in ending work in
process.
Problem2. Weighted-average method.
Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the
testing department. This problem focuses on the assembly department. The process-costing system at Larsen Company has a single
direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the
beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each
car seat, it is immediately transferred to testing.
Larsen Company uses the weighted-average method of process costing. Data for the assembly department for October 2020 are as
follows:
Work in process, October 1ª
Started during October 2020
Completed during October 2020
Work in process, October 31b
Total costs added during October 2020
Physical Units
(Car Seats)
5.000
20.000
22.500
2.500
Direct
Materials
$1,250.000
Conversion
Costs
$ 402,750
$4,500,000
$2,337,500
a Degree of completion: direct materials,?%; conversion costs, 60%.
• Degree of completion: direct materials,?%; conversion costs, 70%.
1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your
schedule.
2. What issues should the manager focus on when reviewing the equivalent units calculation?
3. For each cost category, summarize total assembly department costs for October 2020 and calculate the cost per equivalent unit.
4. Assign costs to units completed and transferred out and to units in ending work in process.
Answer
1. Calculate the cost per equivalent unit for direct materials and conversion costs: Direct Materials: $1,250,000/40,175 = $31.07 per equivalent unit; Conversion Costs: $2,337,500/9,015 = $258.45 per equivalent unit.
2. Issues to focus on when reviewing the equivalent units calculation include ensuring that the physical units and degree of completion are accurately calculated and that the costs are properly allocated.
3. Total assembly department costs for October 2020: Direct Materials: $1,250,000; Conversion Costs: $2,337,500.
4. Assign costs to units completed and transferred out and to units in ending work in process: Units completed and transferred out: Direct Materials: $1,250,000; Conversion Costs: $2,337,500. Units in ending work in process: Direct Materials: $31.07 x 2,500 = $77,675; Conversion Costs: $258.45 x 2,415 = $625,817.50.