a.
Prepare a production cost report using the weighted-average method.
a.

Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the
Compute the total units for materials, labor and
Particulars | Physical units | Materials | Labor | Overhead |
Beginning work-in-process inventory | 80,000 | |||
Units started this period | 400,000 | |||
Total units | 480,000 | |||
Completed and transferred out | ||||
Beginning work-in-process inventory | 80,000 | |||
Started and currently completed | 280,000 | |||
Total transferred out | 360,000 | 360,000 | 360,000 | 360,000 |
Units in ending work-in-process inventory | 120,000 | 120,000 | 48,000(1) | 48,000 (2) |
Total units | 480,000 | 480,000 | 408,000 | 408,000 |
Table: (1)
Compute the cost per equivalent for materials, labor and overhead:
Particulars | Total | Materials | Labor | Overhead |
Costs in beginning work-in-process inventory | $ 1,222,800 | $ 240,000 | $ 546,000 | $ 436,800 |
Current period costs | $ 5,534,400 | $ 1,560,000 | $ 2,208,000 | $ 1,766,400 |
Total costs | $ 6,757,200 | $ 1,800,000 | $ 2,754,000 | $ 2,203,200 |
Cost per equivalent unit | ||||
Materials | $ 3.75(3) | |||
Labor | $ 6.75(4) | |||
Overhead | $ 5.40(5) |
Table: (2)
Compute the total costs of materials, labor and overhead:
Particulars | Total | Materials | Labor | Overhead |
Transferred out: | ||||
Materials | $ 1,350,000 | $ 1,350,000(6) | ||
Labor | $ 2,430,000 | $ 2,430,000(7) | ||
Overhead | $ 1,944,000 | $ 1,944,000(8) | ||
Total costs | $ 5,724,000 | |||
Work-in-process ending inventory | ||||
Materials | $ 450,000 | $ 450,000(9) | ||
Labor | $ 324,000 | $ 324,000(10) | ||
Overhead | $ 259,200 | $ 259,200(11) | ||
Total ending work-in-process inventory | $ 1,033,200 | |||
Total costs | $ 6,757,200 | $ 1,800,000 | $ 2,754,000 | $ 2,203,200 |
Table: (3)
Working note 1:
Compute the units in ending work-in-process inventory:
Working note 2:
Compute the units in ending work-in-process inventory:
Working note 3:
Compute the cost per equivalent unit:
Working note 4:
Compute the cost per equivalent unit:
Working note 5:
Compute the cost per equivalent unit:
Working note 6:
Compute the costs assigned to units transferred out:
Working note 7:
Compute the costs assigned to units transferred out:
Working note 8:
Compute the costs assigned to units transferred out:
Working note 9:
Compute the costs assigned to ending work-in-process inventory:
Working note 10:
Compute the costs assigned to ending work-in-process inventory:
Working note 11:
Compute the costs assigned to ending work-in-process inventory:
b.
Show the
b.

Explanation of Solution
Journal entries:
It is the important part of accountancy. A journal entry consists of recording which is either a debit or credit. The total of both debit and credit must be equal.
Compute the difference between the correct computation and the information given in the statement:
Particulars | Work-in-process | Finished goods |
As per statement | $ 793,152 | $ 337,560 |
Correct | $ 1,033,200 | $ 318,000 |
Difference | ($ 240,048) | $ 19,560 |
Table: (4)
Journal entry of passing the correctly computed information:
Particulars | Post Ref. | Debit | Credit |
Work-in-process | $ 240,048 | ||
Finished goods | $ 19,560 | ||
Cost of goods sold | $ 220,488 |
Table: (5)
Working note 12:
Compute the correct value of finished goods:
c.
Determine the effect of adjustment not being made with respect to inventories being overstated or understated.
c.

Explanation of Solution
If the adjustments are not made with respect to inventories being overstated or understated the following effects will appear on the costing of the process:
- • Finished goods would have remained overstated.
- • Work-in-process would have remained understated.
- • Income would have remained understated.
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