Chapter4&4A
Department accumulates costs and then the costs are assigned equally to all products that flow through the department. We need to calculate the cost per unit (to do this we need to calculate costs and number of units - equivalent units). We need to calculate equivalent units because a department usually has some partially completed units in its beginning and ending inventory
Two half completed products are equivalent to one completed product. For example, 80% of 1000 units complete are equivalent to 800 complete units.

There two ways to calculate equivalent units:
The weighted-average method:
Blends together units and costs from prior and current periods.
No distinction between work done in prior or current periods.
We add together the units of transferred out and the equivalent units in ending work in process inventory.
FIFO
More accurate than weighted average method
The calculation of equivalent units is different.
The way in which the costs of beginning inventory are treated in the cost reconciliation is different.
Better way to look at cost control.
In a lean production environment, FIFO and weighted-average methods yield similar unit costs. When considering cost control, FIFO is superior to weighted-average because it does not mix costs of the current period with costs of the prior period.
Steps to completing question: 1. Use the equation Beginning Inventory WIP + Units Started = Units transferred + Ending Inventory WIP to figure out the number of units in each area 2. Calculate the equivalent units of production
WA= units transferred out + equivalent units in ending inventory
FIFO= same as WA except subtract out equivalent units in beginning inventory 3. Calculate cost/ equivalent units
WA= because we know that the left side of the equation must equal to the right side. We can use the costs given on the left side and the equivalent units we just calculate on the right to calculate our cost/ equivalent units. 4. Calculate the cost of ending inventory (WIP)
Same for both WA and FIFO: Use the cost/equivalent units and multiply by the number of equivalent units in ending WIP to get the cost of ending WIP. 5. Calculate the cost of the units transferred:
WA= number of units transferred * cost/equivalent units
FIFO: because the units transferred include units that were started in the prior period and some that were fully started and completed in the current period and we are using FIFO, we need to make sure we keep costs separate.
6. Reconciliation: under both methods, right side will equal to the left side once you have calculated all these costs.