Frosty Corp. produces gluten-free vanilla cake icing which it sells in small containers. Their accountant is performing some process costing calculations and has gathered the following information for the current month of October:
The accountant must decide whether they will select the FIFO or Weighted-Average method. In order to facilitate this process, they have collected data from both perspectives. What is the cost per equivalent unit for Conversion Costs using the Weighted-Average method?

Question

Frosty Corp. produces gluten-free vanilla cake icing which it sells in small containers. Their accountant is performing some process costing calculations and has gathered the following information for the current month of October:
 The accountant must decide whether they will select the FIFO or Weighted-Average method. In order to facilitate this process, they have collected data from both perspectives. What is the cost per equivalent unit for Conversion Costs using the Weighted-Average method?

Quizplus · Accepted Answer

This question requires several steps before being able to calculate the cost per equivalent unit. First, calculate what costs are included when using the Weighted-Average method, so that will include beginning WIP Inventory costs. Use the beginning WIP Inventory of $986 plus the Conversion Cost added during the period of $6,930 for a total of $7,916. Now, divide by Equivalent Units (Weighted-Average): $7,916/6,765 = $1.17 per unit.