Final answer:
A production cost report can be prepared using the weighted average method by calculating the total cost, average variable cost, average total cost, and marginal cost. These measures help understand production costs and firm profitability when compared to the market price.
Step-by-step explanation:
The student is asking how to prepare a production cost report for the molding department using the weighted average method. This process involves calculating various cost measures, such as total cost, average variable cost, average total cost, and marginal cost. The weighted average method means that the cost per equivalent unit is based on the combined cost of beginning inventory and the costs added during the period, divided by the equivalent units.
To calculate the total cost, sum the total fixed costs and variable costs. The average variable cost can be determined by dividing the total variable costs by the total output. Similarly, to find the average total cost, divide the total cost by the total output. Marginal cost is calculated for each additional unit by taking the change in total cost divided by the change in quantity. These calculations are based on the given formulas in the student's book and are crucial for understanding how costs behave at different levels of production.
It's important to note that these average costs tend to have a U-shaped curve on a graph, signifying that they decrease to a point with increased production, then increase. A company's profitability is suggested if the average cost of production remains below the market price, allowing the firm to earn profits.