Question: Fairfax Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During September, the company transferred 735,000 units of product to finished goods. At the end of September, the goods in process inventory consists of 207,000 units that are 90% complete with respect to labor. Beginning inventory had $244,920 of direct materials and $69,098 of direct labor cost. The direct labor cost added in September is $1,312,852, and the direct materials cost added is $1,639,080.

Required: 1. Determine the equivalent units of production with respect to (a) direct labor and (b) direct materials.

2. Compute both the direct labor cost and the direct materials cost per equivalent unit.

3. Compute both direct labor cost and direct materials cost assigned to (a) units completed and transferred out, and (b) ending goods in process inventory.
Analysis Component

4. The company sells and ships all units to customers as soon as they are completed. Assume that an error is made in determining the percentage of completion for units in ending inventory. Instead of being 90% complete with respect to labor, they are actually 65% complete. Write a one-page memo to the plant manager describing how this error affects its September financial statements.