Completing A Process Cost Summary Using The Weighted Average

Completing A Process Cost Summary Using the Weighted-Average Method

Complete the process cost summary for Raman Company based on the provided data, using the weighted-average method. Prepare journal entries to record overhead costs, direct labor, and applied overhead. Additionally, compute costs assigned to output, including units transferred out and ending goods in process, and transfer the costs to finished goods inventory.

Paper For Above instruction

Raman Company’s process costing summary for the month of May illustrates its production activities, including units transferred out, units in ending inventory, and associated costs. To accurately reflect the costs, it is essential to calculate the equivalent units of production, assign costs appropriately, and prepare journal entries for overhead, direct labor, and finished goods transfer, following the weighted-average method.

First, prepare the process cost summary by calculating total costs to account for, units in process, and equivalent units of production (EUP). Total costs include beginning inventory costs and costs incurred during the period. Units transferred out are added to the inventory, and ending inventory units are analyzed based on their percentage of completion.

Using the weighted-average approach, the cost per equivalent unit is derived by dividing total costs (beginning inventory plus costs incurred) by the equivalent units of production. This calculation offers a uniform cost per unit, simplifying cost assignment across units transferred out and in process.

Next, allocate costs to units transferred out and to ending inventory. All transferred-out units are assigned the calculated cost per unit, reflecting the total costs spread evenly across units. For ending inventory, costs are assigned based on the percentage of completion of units remaining in process, considering their equivalent units.

Journal entries are then prepared to record manufacturing overhead, direct labor, and the application of overhead to production. For example, overhead costs are debited from Manufacturing Overhead and credited to Accounts Payable or Cash. Applied overhead is credited to Work in Process based on the predetermined overhead rate, calculated as a percentage of direct labor costs.

Finally, journal entries for transferring the completed units to finished goods inventory and recording sales are prepared. Transferring costs from Work in Process to Finished Goods Inventory involves debiting Finished Goods and crediting Work in Process with the total cost of completed units.

In conclusion, applying the weighted-average method requires careful calculation of equivalent units and accurate cost assignment. The process cost summary provides essential insights for financial reporting and cost control within manufacturing operations, ensuring that costs are accurately allocated to production and inventory accounts.

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