A Company Uses the Weighted Average Method for Inventory Costing

question 154

Multiple Choice

A company uses the weighted average method for inventory costing. During a period, a production department had 20,000 units in beginning goods in process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending goods in process inventory and are 75% complete. All of these are with respect to labor. The production department had labor costs in the beginning goods is process inventory of $99,000 and total labor costs added during the period are $726,825. Compute the equivalent cost per unit for labor.

• A) $4.40.
• B) $4.76.
• C) $4.19.
• D) $4.55.
• E) $4.61.

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Definitions:

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, used for internal decision-making processes.

Net Operating Income

The net profit of a company, calculated by deducting operating expenses from the gross profit.

Absorption Costing

A financial recording strategy that encompasses all costs related to production, such as raw materials, labor directly associated with the production, and all overhead expenses, whether they vary or are fixed, as part of a product's cost.

Variable Costing

An accounting method where only variable manufacturing costs are included in product costs, with fixed overhead expenses treated as period costs.