P$5\mathrm{.}32$ Weighted average process costing: manufacturer

Schweitzer Limited's machining department had $20000$ units in work in process on $1$ March. These

units were $40$ per cent complete with respect to conversion. Direct materials are added at the

beginning of the production process, while conversion costs are incurred uniformly throughout the

process. An additional $40000$ units were started during March, and $10000$ units were in work in

process on $31$ March. The units in work in process on $31$ March were $20$ per cent complete with

respect to conversion.

Costs incurred in the machining department for March were as follows:

Required

Using an example, explain the concept of equivalent units. Explain why an understanding of

equivalent units is necessary to undertake process costing.

Using the weighted average method of process costing, calculate the cost of goods completed

and transferred out during March and the cost of work in process at $31$ March. Show all workings.

Construct an Excel spreadsheet to prepare March's production report. What is the total cost of

completed units if the units in work in process on $31$ March are $70$ per cent complete with respect

to conversion?