Wize University Managerial Accounting Textbook > Process Costing
Weighted-Average Unit Cost & Cost Reconciliation
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Unit Cost and Cost Reconciliation
Unit Costs
This section of the production cost report estimates an average cost per unit for each cost component (Direct Materials, Conversion Costs and Transferred-in Costs).
Cost Reconciliation
In this last section of the production cost report, we use the equivalent units and the unit costs to determine the total costs that will be transferred out of the work in process account and the account's ending balance.
0:00 / 0:00
Example: Unit Cost and Cost Reconciliation
ABC Inc. has 3 stages in its production process: Process A, Process B and Process C. In Process A, 6,000 units were in work in process on July 31st that were 40% complete. During August, an additional 9,000 units were started. On August 31st, 3,000 units were still in process and 15% complete. Direct materials are added at the beginning of the process.
Equivalent units:
- Direct materials: 15,000
- Conversion costs: 12,450
a. Calculate the unit cost for materials and conversion costs.
b. Calculate the cost of units transferred out and the cost of ending work in process.
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Practice: Unit Cost and Cost Reconciliation
Wize Company uses a process cost system. The Finishing Department adds materials at the beginning of the process and conversion costs are incurred uniformly throughout the process. Work in process on August 1 was 10,000 units that were 60% complete and Work in Process on August 31 was 9,000 units that were 25% complete. 35,000 units were transferred into the Finishing Department in August.
Beginning WIP Costs
Direct Materials: $90,000
Direct Labour: $55,500
Manufacturing Overhead: $94,520
Transferred in costs: $179,300
Costs Added in August
Direct Materials: $174,600
Direct Labour: $92,700
Manufacturing Overhead: $100,000
Transferred in costs: $700,000
Prepare the production cost report