Icy Delight Company, which manufactures quality ice cream sold at premium prices, uses a single production department. Production begins with the blending of various ingredients, which are added at the beginning of the process, and ends with the packaging of the ice cream. Packaging occurs when the mixture reaches the 90% stage of completion. The two-litre cartons are then transferred to the shipping department for shipment. Labour and overhead are added continuously throughout the process. Manufacturing overhead is applied on the basis of direct-labour hours at the rate of $3.00 per hour.

The company has always used the weighted-average method to determine equivalent units of production and unit costs. Now, production management is considering changing from the weighted-average method to the first-in, first-out method. The following data relate to actual production during the month of May:

Instructions
(a) Prepare a schedule of equivalent units for each cost element for the month of May using (1) the weighted-average method, and (2) the first-in, first-out method.
(b) Calculate the cost (to the nearest cent) per equivalent unit for each cost element for the month of May using (1) the weighted-average method, and (2) the first-in, first-out method.
(c) Discuss the advantages and disadvantages of the weighted-average method versus the first-in, first-out method.

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Costs Work in process inventory, May 1 (16,000 litres: 15% complete) Direct materials (ingredients) Direct labour ($10 per hour) Manufacturing overhead $ 45,600 6,250 1,875 Costs Incurred Direct materials (ingredients) Direct materials (cartons) Direct labour ($10 per hour) Manufacturing overhead Production Units $228,400 7,000 35,000 10,500 Litres Work in process inventory, May 1 (15% complete) Started in May Sent to shipping department Work in process inventory, May 31 (95% complete) 16,000 84,000 80,000 20,000