Process Costing and Hybrid Product-Costing Systems: Mcgraw-Hill/Irwin

Chapter 6
Process Costing
and Hybrid
Product-
Costing Systems
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning
Objective
1
Job-Costing and Process Costing:
Opposite Ends of a Continuum
Job-Costing Systems Process-Costing

Systems
Distinct, identifiable
units of a product Masses of identical
or service or similar units of a
product or service
Examples:
Custom-made Examples:
machines, Food,
Houses Chemical processing
Comparison of Job-Order Costing
and Process Costing
Process
Process Job-order
Costing
Costing Costing
 Used for production of small,

identical, low cost items.
 Mass produced in automated
continuous production process.
 Costs cannot be directly traced to
each unit of product.
1-4
and Process Costing
Process
Process Job-order
Costing
Costing Costing
Typical process cost applications:

 Petrochemical refinery
 Paint manufacturer
 Paper mill
1-5
Similarities in Job Order and Process Costing
Both systems:
 determine a product cost by measuring the

amount of direct materials and direct labor
used and allocating overhead costs.
 allocate overhead using a predetermined
overhead rate (or activity-based costing).
 maintain perpetual inventory records with
subsidiary ledgers for materials, work in
process, and finished goods.
and Process Costing
Job-order costing Process costing
– Costs accumulated by – Costs accumulated by
the job. department or process.
– Work in process has a – Work in process has a
job-cost sheet for each production report for
job. each batch of products.
– Many unique, high cost – A few identical, low cost
jobs. products.
– Jobs built to customer – Units continuously
order. produced for inventory
in automated process.
1-7
Job Order and Process Cost Systems Compared
Job Order Cost System
Direct materials
Job Cost
Direct labor Sheets
Factory overhead Dept. A and
Dept. B
Direct materials
Job Cost
Direct labor Sheets Finished
Dept. A and goods
Factory overhead
Dept. B
Direct materials
Job Cost
Dept. A and goods
Factory overhead
Dept. B
Process Cost System
Direct
materials Dept. A Dept. B
Direct materials
Job Cost
Dept. A and goods
Factory overhead
Dept. B
Process Cost System
Direct
materials Dept. A Dept. B
Direct Factory Direct Factory

labor overhead labor overhead
Differences Between Job-Order
and Process Costing
The work-in-process
account consists of
individual jobs in a
Direct Material
job-order cost system.
Finished
Direct Labor Jobs Goods
Manufacturing Cost of
Overhead Goods
Sold
1-12
Differences Between Job-Order
and Process Costing
The work-in-process
account consists of
individual products in a
Direct Material
process cost system.
Direct Labor Finished

& Overhead
Products Goods
(Conversion)
When direct labor is a relatively small amount Cost of

compared to material and overhead, it is often Goods
combined with overhead. Sold
1-13
Learning
Objective
2
Process-Costing
• Process-costing is a system where the unit cost of a
product or service is obtained by assigning total
costs to many identical or similar units
• Each unit receives the same or similar amounts of
direct materials costs, direct labor costs, and
manufacturing overhead
• Unit costs are computed by dividing total costs
incurred by the number of units of output from the
production process
Process-Costing Assumptions
• Direct Materials are added at the beginning
of the production process, or at the start of
work in a subsequent department down the
assembly line
• Conversion Costs are added equally along
the production process
Five-Step Process-Costing Allocation
1. Summarize the flow of physical units of
output
2. Compute output in terms of equivalent
units
3. Compute cost per equivalent unit
4. Summarize total costs to account for
5. Assign total costs to units completed and
to units in ending Work-in-Process
Flow of Costs in a Process Cost System
FOH – Melting WIP – Melting Finished Goods

Actual DM
costs
incurred DL
Cost of Goods Sold

FOH – Casting WIP – Casting
Actual
costs
incurred DL
DM Direct materials used in production
DL Direct labor used in production


Actual FOHA DM
costs
incurred DL
FOHA
Cost of Goods Sold
Actual FOHA
costs
incurred DL
FOHA
FOHA Factory overhead applied to work in process


Actual FOHA DM TRAN
costs
incurred DL
FOHA
Cost of Goods Sold
Actual FOHA TRAN

costs
incurred DL
FOHA
TRAN Cost of goods transferred to WIP – Casting


Actual FOHA DM TRAN COGM
costs
incurred DL
FOHA
Cost of Goods Sold
Actual FOHA TRAN COGM

costs
incurred DL
FOHA
COGM Cost of goods manufactured and transferred to finished goods


Actual FOHA DM TRAN COGM SOLD
costs
incurred DL
FOHA
Cost of Goods Sold
FOH – Casting WIP – Casting SOLD
Actual FOHA TRAN COGM

costs
incurred DL
FOHA
SOLD Finished goods sold

Process Cost Flows
One Production Department
Work-in-Process Finished Goods
Inventory Inventory Cost of Goods Sold
Direct material
Cost of goods completed Cost of goods sold
Direct labor
Applied manufacturing and transferred to during current
overhead finished goods period
1-23
Process Cost Flows
Two Sequential Production Departments
Work-in-Process Inventory Work-in-Process Inventory
Production Department A Production Department B
Direct material Cost of goods completed
Direct labor in department A and Cost of goods completed
Applied manufacturing transferred to and transferred to
overhead department B finished goods
Direct material
Direct labor
Applied manufacturing
overhead
Finished Goods Inventory Cost of Goods Sold

Cost of goods sold
during current period
1-24
Learning
Objective
3
Inventories of Partially Processed Materials
A. Often, partially processed materials

remain in various stages of production
in a department at the end of a period.
In this case, the costs in process must
be allocated between the units that
have been completed and transferred
to the next process or to finished
goods and those units that are only
partially completed and remain within
the department.
B. To allocate direct materials and

transferred costs between the output
completed and transferred to the next
process and the inventory of partially
completed goods within the
department, it is necessary to
determine the manner in which
materials are placed in production.
1. All materials may be introduced when
the work begins on a product.
2. For other products, materials may be
added to production uniformly
throughout the production process.
3. In still other situations, materials may
enter the production process at
relatively few points, which may or
may not be evenly spaced throughout
the process.
C. To allocate processing costs between

the output completed and transferred
to the next process and the inventory
of goods within the process, it is
necessary to determine the number of
equivalent units of production during
the period.
D. The equivalent units of production are
the number of units that could have
been manufactured from start to finish
during the period .
E. The conversion cost per equivalent

unit is computed by dividing the sum
of the direct labor and factory
overhead costs for the period by the
number of equivalent units of
production for the period.
Equivalent Units
• A derived amount of output units that:
1. Takes the quantity of each input in units
completed and in unfinished units of work in
process and
2. converts the quantity of input into the amount
of completed output units that could be
produced with that quantity of input
• Are calculated separately for each input
(direct materials and conversion cost)
Equivalent Units: A Key Concept
• Costs are accumulated for a period of time for

products in work-in-process inventory.
• Products in work-in-process inventory at the
beginning and end of the period are only
partially complete.
• Equivalent units is a concept expressing
these partially completed products as a
smaller number of fully completed products.
1-32
Equivalent Units Example
Two one-half completed products are
equivalent to one completed product.
+ = l
So, 10,000 units 70 percent complete

are equivalent to 7,000 complete units.
1-33
Equivalent Units Question 1
For the current period, Jones started
15,000 units and completed 10,000 units,
leaving 5,000 units in process 30 percent
complete. How many equivalent units of
production did Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
1-34
For the current period, Jones started
15,000 units and completed 10,000 units,
leaving 5,000 units in process 30 percent
complete. How many equivalent units of
production did Jones have for the period?
a. 10,000
10,000 units + (5,000 units × .30)
b. 11,500
= 11,500 equivalent units
c. 13,500
d. 15,000
1-35
Calculating and Using Equivalent
Units of Production
To calculate the cost per

equivalent unit for the period:
Cost per
Costs for the period
equivalent = Equivalent units for the period
unit
1-36
If Jones incurred $27,600 in
production costs for the 11,500
equivalent units. What was Jones’s
cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
1-37
If Jones incurred $27,600 in
production costs for the 11,500
equivalent units. What was Jones’s
cost per equivalent unit for the period?
a. $1.84 $27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit
b. $2.40
c. $2.76
d. $2.90
1-38
Calculating and Using Equivalent
Units of Production
To calculate the direct materials and conversion
costs per equivalent unit for the period:
Materials
cost per Materials cost for the period
= Materials equivalent units for
equivalent
unit the period
Conversion
cost per Conversion cost for the period
equivalent = Conversion equivalent units for
unit the period
1-39
Steps 1 & 2 Illustrated
Steps 3, 4 & 5, Illustrated
General Ledger Cost Flows
Illustrated
Departmental Production Report
 Analysis of  Calculation
physical flow of equivalent
of units. units.
Production
Report
 Computation  Analysis of
of unit costs. total costs.
1-43
Weighted-Average
Process-Costing Method
• Calculates cost per equivalent unit of all
work done to date (regardless of the
accounting period in which it was done)
• Assigns this cost to equivalent units
completed & transferred out of the process,
and to incomplete units in still in-process
Weighted-Average
• Weighted-average costs is the total of all
costs in the Work-in-Process Account
divided by the total equivalent units of work
done to date
• The beginning balance of the Work-in-
Process account (work done in a prior
period) is blended in with current period
costs
Equivalent Units of Production –
Weighted-Average Method
The weighted-average method . . .
– Makes no distinction between work done in the
prior period and work done in the current period.
– Blends together units and costs from the prior
period and the current period.
The FIFO method is a more

complex method and is
rarely used in practice.
1-46
1. For example, if 1,000 units are 50%
complete at the end of a period, the
equivalent units of production would be 500
units (1,000*50%).
2. The computation of equivalent units of
production for a period is equal to the sum
of the equivalent units of production for
completion of the beginning work in process
inventory plus the units started and
completed during the period plus the
equivalent units of production in work in
process inventory at the end of the period.
Inventory within Polishing department on March 1 600 units1/3

completed
Completed in polishing department and transferred to 9,800 units,
finished goods during March completed
Inventory within polishing department on March 31 800 units,2/5
completed
Equivalent Unit Of Production—Weighted Average
The equivalent units of production are determined as follows:

To process units in inventory on March 1 (600 unit) degree of 600
completion is not considered
To process units started and completed in March (9,800units – 9,200
600 units)
To process units in inventory on March 31(800 units * 2/5 ) 320
Equivalent units of production in March, 10,120
Account WORK IN PROCESS…POLISHING DEPARTMENT Account

Balance
Date Item Debit Credit Debit Credit
May1 Bal.600 units% 10,200
completed
May 1- Sanding dept. 10,000 160,000 170,200
31 units at $ 16
May31 Direct labor 26,640 196,840
May31 Factory overhead 18,000 214,840
May31 Goods finished, 9.800 200,609.486
units
May31 Bal. 800 units, 2/5 14,230.514
completed
Goods Finished During March
600 units:
9, 200 units
9, 800 units: 9,800 @20.47035573 $ 200,609.486

Polishing Department Inventory on March 31
800 Materials cost in March, at $ 12,800.000

units: $ 16 per unit
Conversion cost in March: 1, 430.514
800 * 2/5, or 320 at
800 $4.47035573
units: Polishing department $14,230.514
inventory on March 31
Total Cost accounted for
$214,840.00
Steps 1 & 2 Illustrated
Steps 3, 4 & 5 Illustrated
Result of the Process
• Two critical figures arise out of Step Five of
the cost allocation process:
1. The amount of the Journal Entry transferring
the allocated cost of units completed and sent
from Work-in-Process Inventory to Finished
Goods Inventory
2. The ending balance of the Work-in-Process
Inventory account that will appear on the
Balance Sheet
Production Report Example
• MVP Sports Equipment Company makes baseball gloves
in two departments, Cutting and Stitching.
• MVP uses the weighted-average cost procedure.
• Material is added at the beginning of the Cutting
Department, and conversion is incurred uniformly
throughout the process.
• Using the following information for the month of March,
let’s prepare a production report for the Cutting
Department.
1-56
Work in process, March 1: 20,000 units Cost
Materials: 100% complete. $ 50,000
Conversion: 10% complete. 7,200
Units started into production in March: 30,000 units

Units completed and transferred out in March: 40,000 units
Work in process, March 31: 10,000 units

Materials 100% complete.
Conversion 50% complete.
Costs incurred during March

Materials cost 90,000
Conversion costs:
Direct labor $ 86,000
Applied manufacturing overhead 107,500
Total conversion costs 193,500
Total costs to account for $ 340,700
1-57
 Analysis of Physical Flow of Units
Physical
Units
Work in process, March 1 20,000
Units started during March 30,000
Total units to account for 50,000
Units completed and transferred out during March 40,000

Total units accounted for 50,000
1-58
 Calculation of Equivalent Units
Conversion Equivalent Units

Physical Percentage Direct
Units Complete Material Conversion
Work in process, March 1 20,000 10%

50% of 10,000 units
Units completed and transferred 40,000 100% 40,000 40,000

Work in process, March 31 10,000 50% 10,000 5,000
Total equivalent units 50,000 45,000
Beginning inventory % is not used in weighted-average method.

1-59


Units started during March 30,000 100% of 10,000 units, all
Total units to account for 50,000 material added at beginning
1-60
Learning
Objective
4
 Computation of unit costs
Direct
Material Conversion Total
Work in Process, March 1 $ 50,000 $ 7,200 $ 57,200
Costs incurred during March 90,000 193,500 283,500
Total costs to account for $ 140,000 $ 200,700 $ 340,700
Equivalent units 50,000 45,000
Cost per equivalent unit $ 2.80 $ 4.46 $ 7.26
$140,000 ÷ 50,000 equivalent units

$2.80 + $4.46
1-62
Learning
Objective
5
 Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
Costs remaining in work-in-process on March 31

Direct Material:
10,000 equivalent units x $2.80 per equivalent unit $ 28,000
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total cost of March 31 work-in-process 50,300
Total costs accounted for $ 340,700
1-64

Direct Material:
Convserion:
1-65

Direct Material:
Convserion:
All costs
Total costs accounted for accounted for $ 340,700
1-66
First-in, First-Out
• Assigns the cost of the previous accounting period’s
equivalent units in beginning work-in-process
inventory to the first units completed and transferred
out of the process
• Assigns the cost of equivalent units worked on
during the current period first to complete beginning
inventory, next to stat and complete new units, and
lastly to units in ending work-in-process inventory
First-in, First-Out
• The beginning balance of the Work-in-
Process account (work done in a prior
period) is kept separate from current period
costs
• MVP Sports Equipment Company makes baseball gloves
in two departments, Cutting and Stitching.
• MVP uses the First-In First-Out cost procedure.
• Material is added at the beginning of the Cutting
Department, and conversion is incurred uniformly
throughout the process.
• Using the following information for the month of March,
let’s prepare a production report for the Cutting
Department.
1-69
Materials: 100% complete. $ 50,000
Units started into production in March: 30,000 units


Materials 100% complete.
Conversion 50% complete.

Conversion costs:
Direct labor $ 86,000
1-70
Physical
Units

1-71


Units started during March 30,000 50% of 10,000 units
Units at the beginning 20,000 90% 18,000
Units completed during march and transferred
20,000 100% 20,000 20,000
Beginning inventory % is used in First-In First-Out method.

1-72


Units started during March 30,000 100% of 10,000 units, all
Total units to account for 50,000 material added at beginning
Units at the beginning 20,000 90% 18,000
Units started and completed during march
20,000 100% 20,000 20,000
1-73
Direct
Work in Process, March 1 $ 57,200

$3.00 + $4.50
1-74
Work in Process March 1 $57,200
Cost added during March (18,000 *$4.50) $81,000
Total Cost 20,000 units @ $6.91 -------------- $138,200
20,000 units @ $7.50 $150,000
Total $288,200
Direct Material:
10,000 equivalent units
its @
x $2.80
$3.00 per equivalent unit $30,000
Convserion:
5,000 equivalent units
s@ x $4.46
$4.50 per equivalent unit 22,500
1-75
Work in process March 1 $57,200
Cost added during this month (18,000 @ $4.50) $81,000
20,000 units @ $6.91 $138,200
Direct Material:
Convserion:
1-76
Work in process March 1 $57,200
Cost added during march (18,000 @ $4.50) $81,000
________ $138,200
Direct Material:
Convserion:
All costs 22,500
5,000 equivalent units x $4.50per equivalent unit
Total cost of March 31 work-in-process accounted for 52,500
1-77
1. For example, if 1,000 units are 50%
complete at the end of a period, the
equivalent units of production would be 500
units (1,000*50%).
2. The computation of equivalent units of
production for a period is equal to the sum
of the equivalent units of production for
completion of the beginning work in process
inventory plus the units started and
completed during the period plus the
equivalent units of production in work in
process inventory at the end of the period.
Inventory within Polishing department on March 1 600 units1/3

completed
Completed in polishing department and transferred to 9,800 units,
finished goods during March completed
Inventory within polishing department on March 31 800 units,2/5
completed
Equivalent Production—First-In First-Out

To process units in inventory on March 1 (600 units * 2/3) 400
600 units)
Equivalent Production—First-In First-Out

To process units in inventory on March 1 (600 units * 2/3) 400
600 units)
Goods Finished During March
600 units: Inventory on March 1, 1/3 completed $ 10, 200

Conversion cost in March:
600* 2/3, or 400 units at $4.50 1, 800
Total (600 @
$20.00)………………………………… $ 12, 000
9, 200 units (unit cost: $ 12,000 + 600 - $ 20) $ 147, 200
Materials cost in March, at $ 16 per unit
Conversion cost in March: 41, 400
9, 200 at $ 4.50 per unit
Total ………………………………… 188, 600
9, 800 units: (unit cost: $ 188, 600 / 92, 00 = $ 20.50)
Goods finished during March: $ 200,600
Polishing Department Inventory on March 31
800 units: Materials cost in March, at $ 16 per $

unit 12,800
Conversion cost in March:
800 units: 800 * 2/5, or 320 at $ 4.50 1, 440 $ 14, 240
Polishing department inventory on
March 31
Steps 1 & 2, Illustrated
(Under FIFO)
Result of the Process (as before)
• Two critical figures arise out of Step Five of
the cost allocation process:
1. The amount of the Journal Entry transferring
the allocated cost of units completed and sent
from Work-in-Process Inventory to Finished
Goods Inventory
2. The ending balance of the Work-in-Process
Inventory account that will appear on the
Balance Sheet
Transferred-in Costs
• Are costs incurred in previous departments that are
carried forward as the products cost when it moves
to a subsequent process in the production cycle
• Also called Previous Department Costs
• Journal entries are made to mirror the progress in
production from department to department
• Transferred-in costs are treated as if they are a
separate type of direct material added at the
beginning of the process
(Under FIFO)
Learning
Objective
6
MVP SPORTS EQUIPMENT COMPANY
Production Report: Cutting Department
Percentage of
Completion Equivalent Units
Physical with Respect to Direct
Units Conversion Material Conversion


Direct
Work in Process, March 1 $ 50,000 $ 7,200 $ 57,200




Direct Material:
Conversion:

1-93
Actual Costing vs. Normal Costing
Manufacturing
overhead is
Actual costs of applied
manufacturing overhead to Work-in-
are entered in Work-in- Process Inventory
Process Inventory using a
predetermined
overhead rate
1-94
Departmental Production Report
 Analysis of
physical flow
of units.
 Calculation
of equivalent
units.
 Computation
of unit costs.
 Analysis of
total costs.
1-95
Learning
Objective
7
Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
Job-order Operation Costing Process

Costing (Products produced in batches) Costing
1-97
Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
Job-order Operation Costing Process

Costing (Products produced in batches) Costing
Material Costs charged Conversion costs

to batches as in assigned to batches
job-order costing. as in process costing.
1-98
Learning
Objective
8
(appendix)
Sequential Production Departments
Work-in-Process Inventory: Work-in-Process Inventory:
Cutting Department Stitching Department
Direct material Cost of goods Transferred-
completed and in costs
Conversion: transferred out
Direct labor Direct material
Manufacturing
overhead Conversion:
Direct labor
Manufacturing
overhead
1-100
Exh.
4-4

Transferred in: 100% complete. $ 61,000
Materials: none -0-
Units transferred in during March: 40,000 units


Transferred in: 100% complete.
Materials: none
Conversion: 90% complete.

Transferred in 290,400
Conversion costs:
Direct labor $115,000
1-101
Physical
Units

Units transferred in during March 40,000

1-102
Conversion
Physical Percentage Transferred Direct
Units Completion In Material Conversion

Units transferred in during March 40,000
Total units to account for 50,000 90% of 20,000 units
Units completed and transferred out during March 30,000 30,000 30,000 30,000
Work in process, March 31 20,000 90% 20,000 -0- 18,000
Total equivalent units 50,000 30,000 48,000
1-103
Transferred Direct
In Material Conversion Total
Work in Process, March 1 $ 61,000 -0- $ 7,600 $ 68,600

Costs incurred during March 290,400 $ 7,500 230,000 527,900
Total costs to account for $ 351,400 $ 7,500 $ 237,600 $ 596,500
Equivalent units 50,000 30,000 48,000

Cost per equivalent unit $ 7.028 $ 0.25 $ 4.95 $ 12.228
$351,400 $7,500 $237,600 $ 7.028

50,000 30,000 48,000 + $.25
+ $4.95
1-104
Cost of goods completed and transferred out of Stitching Dept. during March
Costs remaining in work-in-process in Stitching Dept. on March 31

Direct Material:
Convserion:

All costs
Total costs accounted for accounted for $ 596,500
1-105
Standard Costing and
Process Costing
• Teams of design and process engineers,

operations personnel, and management
accountants work together to determine
separate standard costs per equivalent
unit on the basis of different technical
processing specifications for each product
• Standard costs replace actual costs in
equivalent unit calculations
General Ledger Cost Flows
Illustrated
Transferred-in Costs
• Are costs incurred in previous departments that are
carried forward as the products cost when it moves
to a subsequent process in the production cycle
• Also called Previous Department Costs
• Journal entries are made to mirror the progress in
production from department to department
• Transferred-in costs are treated as if they are a
separate type of direct material added at the
beginning of the process
Hybrid Costing Systems
• A Hybrid-Costing System blends
characteristics from both job-costing and
process-costing systems
• Many actual production systems are in fact
hybrids
• Examples include manufacturers of
televisions, dishwashers and washing
machines, as well as Adidas
End of Chapter 4
I’m ready to process
some leisure time.
1-116

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Chapter 6

Job-Costing Systems Process-Costing

 Used for production of small,

Typical process cost applications:

 determine a product cost by measuring the

Job Order Cost System

Job Order Cost System

Job Order Cost System

Process Cost System

Job Order Cost System

Process Cost System

Direct Factory Direct Factory

Direct Labor Finished

When direct labor is a relatively small amount Cost of

FOH – Melting WIP – Melting Finished Goods

Cost of Goods Sold

DM Direct materials used in production

DL Direct labor used in production

FOH – Melting WIP – Melting Finished Goods

FOHA Factory overhead applied to work in process

FOH – Melting WIP – Melting Finished Goods

Actual FOHA TRAN

TRAN Cost of goods transferred to WIP – Casting

FOH – Melting WIP – Melting Finished Goods

Actual FOHA TRAN COGM

COGM Cost of goods manufactured and transferred to finished goods

FOH – Melting WIP – Melting Finished Goods

Actual FOHA TRAN COGM

SOLD Finished goods sold

Finished Goods Inventory Cost of Goods Sold

A. Often, partially processed materials

B. To allocate direct materials and

C. To allocate processing costs between

E. The conversion cost per equivalent

• Costs are accumulated for a period of time for

So, 10,000 units 70 percent complete

To calculate the cost per

The FIFO method is a more

Inventory within Polishing department on March 1 600 units1/3

The equivalent units of production are determined as follows:

Account WORK IN PROCESS…POLISHING DEPARTMENT Account

Goods Finished During March

9, 800 units: 9,800 @20.47035573 $ 200,609.486

Polishing Department Inventory on March 31

800 Materials cost in March, at $ 12,800.000

Units started into production in March: 30,000 units

Work in process, March 31: 10,000 units

Costs incurred during March

Units completed and transferred out during March 40,000

Conversion Equivalent Units

Work in process, March 1 20,000 10%

Units completed and transferred 40,000 100% 40,000 40,000

Beginning inventory % is not used in weighted-average method.

Conversion Equivalent Units

Work in process, March 1 20,000 10%

$140,000 ÷ 50,000 equivalent units

Costs remaining in work-in-process on March 31

Costs remaining in work-in-process on March 31

Costs remaining in work-in-process on March 31

Units started into production in March: 30,000 units

Work in process, March 31: 10,000 units

Costs incurred during March

Units completed and transferred out during March 40,000