Question:
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)
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$ 29,000
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Department B conversion costs
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7,675
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Current work (17,500 units started)
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Prior department costs
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70,000
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Department B costs
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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.