Question

Peridot Company's grinding department had the following data for the month of January: Production: Units in...

Peridot Company's grinding department had the following data for the month of January:

Production:

Units in process, January 1, 70% complete 16,000 tons
Units completed and transferred out 37,000 tons
Units in process, January 31, 45% complete 20,000 tons


Costs:

Work in process, January 1 $6,225
Costs added during January $19,075


Determine the cost to be assigned to ending work-in-process (EWIP) using the weighted average method. (Note: Round the unit cost to two decimal places.)

a.$8,984

b.$4,950

c.$3,790

d.$7,565

I know that the answer is B. Could you please show how to arrive to that answer? Any extra explanation would be helpful. Thank you!

Business   Accounting   
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Homework Answers

Answer #1

The correct answer is B) $ 4950

Explanation

Firstly we have to calculate the equivalent units for the cost

= (unit completed and transferred *100%) +( units in ending inventory *45%)

=(37000*100%)+(20000*45%)

= 37000 +9000

= 46000 Units

Now we have to calculate the cost per equivalent unit

= ( beginning inventory cost + cost incurred during the period)/ equivalent units

= (6225+19075)/46000

= $0.55 Per equivalent unit

Cost of ending inventory

= Equivalent unit of ending inventory * cost per equivalent unit

= ( 20000*45%)*.55

= 9000*0.55

= $4950

Thus the correct answer is B) $4950

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