Arizaga Corporation manufactures canoes in two departments, Fabrication and Wate

Question

Arizaga Corporation manufactures canoes in two departments, Fabrication and Waterproofing. In the Fabrication Department, fiberglass panels are attached to a canoe- shaped aluminum frame. The canoes are then transferred to the Waterproofing department to be coated with sealant. Arizaga uses a weighted-average process cost system to collect costs in both departments. All materials in the Fabrication Department are added at the beginning of the production process. On July 1, the Fabrication Department had 470 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 690 canoes in process that were 30% complete with respect to conversion cost. During July, the Fabrication Department completed 8,200 canoes and transferred them to the Waterproofing Department. What are the Fabrication Department's equivalent units related to materials for July?

Explanation / Answer

In the weighted average method, total equivalent units for the process for a period are calculated using the following formula.

Total equivalent units for a cost component = A + B × C

Where
A = units transferred out to the next department
B = units in closing work in process
C = percentage of completion with respect to the relevant cost component

Total equivalent units of direct materials = 8200 + 690 * 100%

                                                                          =8890 units

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