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Managerial Accounting: The Corners...
Solutions
Managerial Accounting: The Corners...
Cassien Inc. manufactures products that pass through two or more processes. During June, equivalent units were computed using the weighted average method:
Required:
- 1. Calculate the unit cost for June using the weighted average method.
- 2. Using the weighted average method, determine the cost of EWIP and the cost of the goods transferred out.
- 3. CONCEPTUAL CONNECTION Cassien had just finished implementing a series of measures designed to reduce the unit cost to $2.00 and was assured that this had been achieved and should be realized for June’s production. Yet, upon seeing the unit cost for June, the president of the company was disappointed. Can you explain why the full effect of the cost reductions may not show up in June? What can you suggest to overcome this problem?
1.
Compute unit cost for the month of June with the help of weighted average method.
Weighted Average Method:
The method in which both prior cost and cost incurred during the period are added to calculate unit cost is known as weighted average method. In this method, to calculate unit cost, summation of cost of BWIP and cost added during period is divided by equivalent units.
Use the following formula to calculate unit cost:
2.
Compute cost of EWIP and total cost of goods transferred out, using weighted average method.
3.
State the reason for not achieving the objective of cost reduction and suggest a solution to overcome this problem.
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