Question

One of the ways to calculate certain process costs is referred to as the weighted-average method.

1. What does such method mean and what are some assumptions associated with using it?

2. In quantifying each department’s number of units produced, the textbook introduces something known as an equivalent number of fully completed units. What does this mean? And is this an effective way to measure the output of a department and/or does it have some limitation?

Answer 1

Weighted Average Method

it is used to calculate mean of different numbers

for Ex when there are different products with differant prices then we want ro know the avg price then we can use the below formula for weighted average method

W1X1+W2X2/x1+x2

where w is the proportion of items involved and x is the value of differant items

Equivalent number of completed units

when there is non completed units and when we want to find closing stock value we use this method

under this the value of the portion which completed is used and finds the closing stock value