Final answer:
The cost of units transferred out under the weighted-average method is calculated by dividing the combined total costs of beginning work in process and the current period's costs by the total equivalent units. This yields an average cost per unit, which is then multiplied by the number of units transferred out to find the cost per cost category.
Step-by-step explanation:
When applying the weighted-average method in process costing, the cost of units transferred out of a department for a cost category is computed by combining the costs of the beginning work in process with the costs of the current period. This total cost is then divided by the total equivalent units to determine the average cost per unit. To find the cost of units transferred out, we multiply the number of units by this average cost per unit.
The formula for calculating the average cost per unit is given by AC = TC/Q, where AC stands for average cost, TC stands for total cost, and Q stands for the quantity of output produced. For example, if a department has a total cost of $44 for producing two widgets, the average cost per widget would be $44/2 = $22 per widget.
To measure the cost per unit more accurately, the marginal cost is also considered along with average cost. Marginal cost, represented as MC = ∆TC/∆Q, is the cost of producing one more unit of output, which is calculated as the change in total cost divided by the change in output. In a scenario where producing an additional widget increases the total cost from $32.50 to $44, the marginal cost of the second widget would be $44 - $32.50 = $11.50.