Asked by Sophia Winner on May 03, 2024
Verified
Claus Corporation manufactures a single product and uses process costing. As of the beginning of January, the company successfully implemented lean production. As a result, no work in process inventories were on hand at the end of January, as indicated by the data below:
Required:a. Assume the company uses the weighted-average method. Compute the equivalent units of production for January.b. Assume that the company uses the first-in, first-out method. Compute the equivalent units of production for January.c. If the company starts 450,000 units into production during the following month (February) has no ending work in process inventory in that month, what would be the equivalent units of production under the weighted-average method? The first-in, first-out method?
Weighted-Average Method
An inventory valuation technique that calculates the cost of inventory by taking the average cost of all similar items present in the inventory.
First-In, First-Out Method
An inventory valuation method whereby the oldest inventory items are recorded as sold first, thus the cost of items purchased first is charged against revenue earlier.
Equivalent Units
A concept used in cost accounting to convert units of production into a common measure.
- Comprehend and utilize the weighted-average method in process costing.
- Internalize and employ the FIFO method for process costing purposes.
- Evaluate the equivalent production units applying both the weighted-average and FIFO techniques.
Verified Answer
b. First-in, first-out method equivalent units of production
c. No inventories would be on hand at either the beginning or the end of February and thus the number of units started into production would equal the number of units completed and transferred out for the month. This would be 450,000 units, which would be the equivalent units for the month under both the weighted-average and first-in, first-out methods.
Learning Objectives
- Comprehend and utilize the weighted-average method in process costing.
- Internalize and employ the FIFO method for process costing purposes.
- Evaluate the equivalent production units applying both the weighted-average and FIFO techniques.
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