Question

Under the weighted average method, equivalent units of output are computed by:

a. adding units completed to equivalent units in ending work in process.
b. subtracting units completed from equivalent units in beginning work in process.
c. subtracting units completed from equivalent units in ending work in process.
d. adding units completed to equivalent units in beginning work in process.

Answer 1

The weighted average method computes equivalent units of output by adding the units completed and the equivalent units in the ending work in process inventory.

Step-by-step explanation:

This method is utilized within managerial accounting, specifically in the process costing system, where costs are distributed based on the weighted average of work done in the current and previous periods. To arrive at the number of equivalent units, you need to combine the number of units completed during the period with the number of equivalent units in the ending work-in-process inventory.

This allows for the calculation of costs per equivalent unit which then can be assigned to both completed units and units still in process. Bear in mind that in a manufacturing context, this costing approach is important for valuing inventory and works best when production processes are continuous and homogeneous.