# Question

Lorenen Inc. manufactures products that pass through two or more processes. During June, equivalent units were computed using the weighted average method:

Units completed ...................................... 35,600

Units in EWIP 3 Fraction complete (24,000 3 60 percent) .......... 14,400

Equivalent units of output ........................ 50,000

April’s costs to account for are as follows:

BWIP (10,000 units, 80 percent complete) ................. $32,000

Materials ............................... 60,000

Conversion costs .......................... 24,000

Total .............................. $116,000

Required:

1. Calculate the unit cost for June using the weighted average method.

2. Using the weighted average method, determine the cost of EWIP and the cost of the goods transferred out.

3. Lorenen had just finished implementing a series of measures designed to reduce the unit cost to $2.00 and was assured that this had been achieved and should be realized for June’s production; yet upon seeing the unit cost for June, the president of the company was disappointed. Can you explain why the full effect of the cost reductions may not show up in June? What can you suggest to overcome this problem?

Units completed ...................................... 35,600

Units in EWIP 3 Fraction complete (24,000 3 60 percent) .......... 14,400

Equivalent units of output ........................ 50,000

April’s costs to account for are as follows:

BWIP (10,000 units, 80 percent complete) ................. $32,000

Materials ............................... 60,000

Conversion costs .......................... 24,000

Total .............................. $116,000

Required:

1. Calculate the unit cost for June using the weighted average method.

2. Using the weighted average method, determine the cost of EWIP and the cost of the goods transferred out.

3. Lorenen had just finished implementing a series of measures designed to reduce the unit cost to $2.00 and was assured that this had been achieved and should be realized for June’s production; yet upon seeing the unit cost for June, the president of the company was disappointed. Can you explain why the full effect of the cost reductions may not show up in June? What can you suggest to overcome this problem?

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