Question

Cost Information and FIFO

Gunnison Company had the following equivalent units schedule and cost information for its Sewing Department for the month of December:

	Direct Materials		Conversion Costs
Units started and completed	49,000		49,000
Add: Units in beginning work in process ×
Percentage complete:
6,000 × 0% direct materials	—
6,000 × 50% conversion Costs			3,000
Add: Units in ending work in process ×
Percentage complete:
10,000 × 100% direct materials	10,000		—
10,000 × 35% conversion Costs	—		3,500
Equivalent units of output	59,000		55,500
Costs:
Work in process, December 1:
Direct Material			$78,000
Conversion Costs			9,000
Total work in process			$87,000
Current costs:
Direct Material			$826,000
Conversion Costs			111,000
Total current costs			$937,000

Required:

1. Calculate the unit cost for December, using the FIFO method.
$ per equivalent unit

2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for.

Cost of goods transferred out	$
Cost of EWIP	$

Cost to account for:
BWIP	$
Current (December)
Total	$

3. What if you were asked for the unit cost from the month of November? Calculate November's unit cost.
$ ___per equivalent unit

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

B Answer - Part 1) : Cost Per Equivalent Unit Under FIFO = equivalent cost for material + equivalent cost for conversion cost - = (826000/59000)+(111000/55500) = $ 14+ $2 - = $16 Thus the correct answer cost per equivalent unit = $ 16 1 Part 2) 8770001 147000 1024000 3 Cost of goods transferred out 4 Cost of EWIP 5 Total Cost to account for 7 BWIP 3 Current (December) (826000+111000) 9 Total 87000 937000 1024000

Note - cost of goods transferred out = = beginning inventory cost + cost to convert beginning inventory + cost of units started and completed = = 87000+(16*49000)+(2*3000) = $ 877000 - Cost of ending work in process = (direct material equivalent unit * cost per equivalent unit) + (conversion equivalent unit * cost per equivalent unit of conversion) = = (10000*14)+(3500*2) = $ 147000 - Part 3) Cost Per Equivalent Unit Under FIFO for November = equivalent cost for material + equivalent cost for conversion cost = (78000/6000)+(9000/3000) = 13+3 = $ 16 Thus the correct answer cost per equivalent unit for november = $ 16