ACC 122: Cost Accounting and Control

Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Lesson title: Process Costing under the Average method Materials:

Lesson Objectives: Textbook, SAS, & calculator
At the end of this module, I should be able to References:
1. Prepare a departmental production report using the Average Hansen & Mowen; Cost Accounting &
method Control; 2019 Edition
Vanderbeck, Edward J.; Principles of
Cost Accounting; 15th edition
Lanen, Anderson & Maher;
Fundamentals of Cost Accounting; 5th
edition

Productivity Tip:
Act it out! Try doing a demonstration of the process you just learned. You can try to take a video of
yourself and watch it later on to review if you did the process correctly.

A. LESSON PREVIEW/REVIEW

1) Activity 1 : Introduction/Review (2 mins)

Hello! Can you still remember what you have studied last time? In the
rectangular shape on the right, write the formula of equivalent units of
production using the FIFO method.

Already done? Now, what I want you to do is to raise your hand and
imagine that you are holding a cup. Imagine that the cup contains your
learnings in process costing under the FIFO method. While holding the
cup, move your hand in circular motion for 5 seconds. Next, put it down,
get the lid of the cup and cover it, then set it aside for now. Do you know
what you just did? You emptied your cup. ☺ This will allow you to focus
more and will not be confused on the next topic which is the Average
Method. You are now ready for this module. Go for it!

2) Activity 2 (LO1): What I Know Chart, part 1 (3 mins)

Alright! Let’s see what you already know, answer the first column (What I know). Leave the third
column (What I Learned) blank at this time.

What I Know Questions What I Learned (Activity 5)

1. How is beginning inventory
costs and accompanying
equivalent output treated in
weighted average costing
method?
Page 1 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

2. What is the difference between

FIFO method and Weighted
Average method in process
costing?

B. MAIN LESSON
1) Activity 3: Content Notes (13 mins)

Make sure to highlight or underline the important parts! Refer to chapter 6 of your book for a more
detailed discussion found on pages 279-284.

LO1: Prepare a departmental production report using the Average method

Weighted Average Costing Method

• Treats beginning inventory costs and accompanying equivalent output as if they belong to
the current period
• Merges prior period output and manufacturing costs found in beginning work in process with
the current period output and manufacturing costs

Physical Flow Analysis and Calculation of Equivalent Units: Weighted Average Method
Prepare a physical flow schedule and an equivalent units schedule for Bienestar’s Blending
Department for the month of May using the weighted average method

Solution
Units started and completed = Units completed − Units, B W I P
= 90,000 − 15,000 = 75,000
Units started = Units started and completed + Units, E W I P
= 75,000 + 30,000 = 105,000

Step 1: Physical Flow Schedule: Blending Department

Units to account for:
Units, beginning work in process (70% complete) 15,000
Units started during May 105,000
Total units to account for 120,000
Units accounted for:
Units completed and transferred out:
Started and completed 75,000

Page 2 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

From beginning work in process 15,000 90,000

Units in ending work in process(40% complete) 30,000
Total units accounted for 120,000

Step 2: Equivalent Units Schedule: Blending Department

Direct Conversion
Materials Costs
Units completed 90,000 90,000
Add: Units in ending work in process ×
Percentage complete:
30,000 × 100% direct materials 30,000
30,000 × 40% conversion costs 12,000
Equivalent units of output 120,000 102,000
• Calculate the unit cost for May using the weighted average method
o Calculate the cost of goods transferred out and the cost of E W I P
o Reconcile the costs assigned with the costs to account for

Step 3: Unit Cost Calculation

Unit cost = Unit materials cost + Unit conversion cost

=
( $1,500+ $18,900 )
+
( $525+ $4,575 )
= $0.17 + $0.05 = $0.22 per ounce
120,000 102,000

Step 4: Valuation of Inventories

Using unit cost information and the information from the equivalent units schedule
Cost of goods transferred out:
Units completed ($0.22 × 90,000) $19,800
E W I P:
($0.17 × 30,000) + ($0.05 + 12,000) 5,700
Total costs assigned (accounted for) $25,500

Step 5: Reconciliation (comparing costs assigned to costs to account for)

Page 3 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Cost to account for:

BWIP $2,025
Current (May) 23,475
Total $25,500

Production Report: Blending Department

Page 4 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

COST INFORMATION

Comparison of Method

First-in, First-out Average Cost

▪ Cost is determined by dividing the current ▪ Cost is determined by dividing the merged
period’s cost of each element by the unit costs of the current period and those carried
output for the period. over as WIP by the unit output.
▪ Total costs to charge to the beginning WIP
is the balance from the prior month plus the
costs incurred to complete these units in the
current period.

Example comparison of computation:

• Beginning Work in Process 3,000 units ⅔ complete
• 5,000 units started and completed.

Page 5 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

• Ending Work in Process 4,000 units ½ complete.

First-in, First-out Average Cost

Work Done to Complete Beginning Units in Beginning Work in Process 3,000
Work in Process (3,000 x 1/3) 1,000 Units Started and Completed 5,000
Units Started and Completed 5,000 Units Completed & Transferred Out
(3,000 + 5,000) 8,000
Work Done this Period on Ending Ending Work in Process
Work in Process (4,000 x ½) 2,000 (4,000 x ½) 2,000
Equivalent Units in Production 8,000 Equivalent Units in Production 10,000

2) Activity 4: Skill-building Activities (15 mins checking) SCORE: ________________

Let’s try to practice what you have learned! Check your answers against the Key to Corrections
found at the end of this SAS. Write your score on the space provided.

Part I (LO1):
Answer Cornerstone 6.9, 6.10 and Exercise 6.16 and in chapter 6 found on pages 300, 301, &
303, respectively, of your textbook.

3) Activity 5: What I Know Chart, part 2 (2 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write your answers in
the “What I Learned” column. Let’s see your improvement!

4) Activity 6: Check for Understanding (10 mins)

To better test your knowledge on the topic, answer individually the following activities below. To
check if you got it right, your teacher will provide you with the key answers. Be honest in checking your
answers. ☺

Answer Exercise 6.18 and 6.20 in chapter 6 found on pages 304-305 respectively, of your
textbook.

Page 6 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Page 7 of 8
This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 14

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

C. LESSON WRAP-UP

1) Activity 7: Thinking about Learning (5 mins)

1. Work Tracker
You are done with this session! Let’s track your progress. Shade the session number you just
completed.

2. Think about your Learning

From a rating of 1-10, determine if you have learned all the learning objectives. What is the reason of
your rating?
__________________________________________________________________________________
__________________________________________________________________________________

What part of the module gave you a hard time to comprehend?

__________________________________________________________________________________
__________________________________________________________________________________

Any other questions or concerns you want to raise?

__________________________________________________________________________________
__________________________________________________________________________________

2) Assignment
To better enhance your knowledge regarding the topic, answer Exercise 6.31 & 6.33 of chapter 6 found
on pages 308-309 in your textbook. Your teacher will provide you with the key answers.

FAQs

1. Why is weighted average better than FIFO?

In a time of decreasing inflation, the profit margins for a company will be higher under weighted average
method as compared to FIFO method because the cost of goods sold will be an average figure under weighted
average method which will be lower if costs are recorded under FIFO method.

2. What companies use weighted average cost?

Fuel Companies. The gas and petroleum industries utilize the weighted average costing method for
inventory purposes. The extraction, collection and storage of liquid fuels and related products makes it necessary
for those involved in both the manufacture and sale of these products to use this inventory method.

Page 8 of 8
This document is the property of PHINMA EDUCATION.