Materials are only one cost item. Other items (often included in a conversion costs
pool) include labor, energy, and maintenance. If the costs of these items vary over time,
this variability can cause a difference in cost of goods sold and inventory amounts when
the weighted-average or FIFO methods are used.
A second factor is the amount of inventory on hand at the beginning or end of an
accounting period. The smaller the amount of production held in beginning or ending
inventory relative to the total number of units transferred out, the smaller the effect on
operating income, cost of goods sold, or inventory amounts from the use of weighted-
average or FIFO methods.
Zero beginning inventory, materials introduced in middle of
Solution Exhibit 17-18A shows equivalent units of work done in the current
period of Chemical P, 50,000; Chemical Q, 35,000; Conversion costs, 45,000.
Solution Exhibit 17-18B summarizes the total Mixing Department costs for July
2009, calculates cost per equivalent unit of work done in the current period for Chemical
P, Chemical Q, and Conversion costs, and assigns these costs to units completed (and
transferred out) and to units in ending work in process.
SOLUTION EXHIBIT 17-18A
Steps 1 and 2:
Summarize Output in Physical Units and Compute Output in Equivalent
Mixing Department of Roary Chemicals for July 2009.
Flow of Production
Work in process, beginning
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
Work done in current period only
Degree of completion in this department: Chemical P, 100%; Chemical Q, 0%; conversion costs, 66 2/3%.