A company uses a process cost accounting system. Its Sewing Department completed and transferred out 120,000 units during the current period. The ending inventory in the Sewing Department consists of 40,000 units (20% complete with respect to direct materials and 60% complete with respect to direct labor). Overhead is applied on the basis of direct labor. Determine the equivalent units of production for the Sewing Department for direct materials, direct labor and overhead assuming the weighted average method.
A) 120,000; 120,000; 120,000
B) 120,000; 160,000; 120,000
C) 128,000; 120,000; 120,000
D) 128,000; 144,000; 144,000
E) 128,000; 184,000; 160,000

Question

Quizplus · Accepted Answer

Weighted average method calculates equivalent units of production by taking into account both the units started and completed during the period and the units in ending work in process inventory, which need to be adjusted for their degree of completion.

Direct materials:
Equivalent units of production = Units completed + (Ending inventory x % complete)
= 120,000 + (40,000 x 20%)
= 128,000 units

Direct labor:
Equivalent units of production = Units completed + (Ending inventory x % complete)
= 120,000 + (40,000 x 60%)
= 144,000 units

Overhead:
Since overhead is applied on the basis of direct labor, the equivalent units of production for overhead will be the same as for direct labor.
= 144,000 units

Therefore, the correct answer is D) 128,000; 144,000; 144,000.

A Company Uses a Process Cost Accounting System