 In this presentation, we will discuss methods to calculate ending work in process and units completed. In a prior presentation, we went through the flow of inventory from raw materials. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. To the finished goods inventory and then the sale of that inventory and the expense of it in the form at of cost of goods sold. As we did that, you'll note that we have these items or these times when we had to transfer from department A, for example, to department B in our process cost system and from department B to the finished goods. The journal entry to transfer from department A to department B would be to credit department A and debit department B in essence decreasing department A and increasing department B. In our example, we're discussing like making candy. In that case, we would take it out of department A once the candy is done, put that into department B where the department B applies the wrappers or something like that. And then we're going to take it out of department B once the wrapper is has been given and put it into the finished goods. So then we'll have the completed product from department B to the finished goods. We're going to need some method, however, to note how much is still in department A and how much is still in department B, how much is still in department B and how much is in the finished goods. There's two methods typically to get to that determination. Or in other words, each department, in our case, department A and department B have to do two numbers or have to calculate two numbers. One is going to be the cost of its ending work and process inventory, what is still in the ending work and process at the end of the time period. In the case of department A with us making the candy, what is still in the work and process not completed. And with regard to the packaging, what is still work and process and not completed, what is not moved out to ending inventory and cost of its completed units that were transferred to the next stage of the production process. We're going to have to figure this out and it's not the easiest thing to figure out. It's not as straightforward because the units are not totally complete. So we're going to have to determine how much is going to be still in process, how much has been transferred out in each department. In our case, we were had an example of two departments, the production department and the packaging department. Note that when we think about the journal entry, we're thinking about a dollar amount, of course, because we're thinking about financial statement transactions. To get there, however, we're going to have to think about units, units of inventory. So we must calculate the units within each department, the units of inventory within each department. A couple methods we can use to do that. One's the weighted average method and the other's going to be a first in, first out method. Now you might recognize these methods as the flow of inventory or flow assumptions that we would make if we were a merchandising company purchasing and selling inventory and making some type of flow assumption. It's a similar type of assumption here, but the application of it will look a little bit different within the manufacturing process. Weighted average method. Calculated unit cost by combining costs and outputs from the current and prior periods. So in other words, we're looking at costs and outputs and in some format combining them with the current and prior periods. Makes no distinction between work done in the prior and current periods. It blends together the units and costs from the prior and current periods. So in so doing, we're going to blend them together. We're going to basically, in essence, that's going to be the averaging process and assume the averaging process will basically work itself out. The average will work and be okay to use. The weighted average method because of this blending process because of us not basically making a distinct cutoff between the work in the prior period and this period. In other words, because of the blending together of units and costs from prior and current periods is often a little bit easier if not quite as precise and that would be one reason to use a weighted average method versus the first and first out method. First and first out method calculates unit cost based only on costs and output from the current period. So we're looking at the costs for the current period and applying out those current period costs with a first and first out assumption. Our comprehensive problem will use the first and first out method and our example problems and our illustrations will be using the weighted average method.