Assigning Costs to Products: Weighted Average
Method.
Varian Company uses the weighted average method for its process
costing system. The Molding department at Varian began the month of
January with 80,000 units in work-in-process inventory, all of
which were completed and transferred out during January. An
additional 90,000 units were started during the month, 30,000 of
which were completed and transferred out during January. A total of
60,000 units remained in work-in-process inventory at the end of
January and were at varying levels of completion, as shown in the
following.
Direct Materials
80% Complete
Direct Labor
90% Complete
Overhead
90% Compete
The following cost information is for the Molding department at
Varian Company for the month of January.
Direct Materials
Direct Labor
Overhead
Total
Beginning WIP Inventory
$1,400,000
$1,100,000
$1,700,000
$4,200,000
Incurred during the month
$1,210,000
$980,000
$1,450,000
$3,640,000
Required
a. Determine the units to be accounted for and units
accounted for; then calculate the equivalent units for direct
materials, direct labor, and overhead. (Hint: This requires
performing step 1 of the four-step process.)
b. Calculate the cost per equivalent unit for direct
materials, direct labor, and overhead. (Hint: This requires
performing step 2 and step 3 of the four-step process.)
c. Assign costs to units transferred out and to units in
ending WIP inventory. (Hint: This requires performing step 4 of the
four-step process.)
d. Confirm that total costs to be accounted for (from step
2) equals total costs accounted for (from step 4). Note that minor
differences may occur due to rounding the cost per equivalent unit
in step 3
e. Explain the meaning of equivalent units.
