Prepare a Production Cost Report: Weighted Average Method
Assume that El Paso Corporation provides you with the following information for one of its department’s operations for September (no new material is added in Department B):
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WIP inventory—Department B |
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Beginning inventory (7,500 units, 20% complete with respect |
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to Department B costs) |
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Transferred in costs (from Department A) |
$ 29,000 |
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Department B conversion costs |
7,675 |
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Current work (17,500 units started) |
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Prior department costs |
70,000 |
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Department B costs |
149,075 |
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The ending inventory has 2,500 units, which are 50 percent complete with respect to Department B costs and 100 percent complete for prior department costs. |
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Required
a. Prepare a production cost report using the weighted average method.
b. Is the ending inventory higher using FIFO or the weighted average method? Why?
c. Would you recommend that El Paso use the FIFO method or the weighted average method? Explain.