Question

Exercise 4A-9 Equivalent Units; Equivalent Units of Production; Assigning Costs-FIFO Method [LO4-6, LO4-7, LO4-8]

Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:

Units in beginning inventory	430
Units started into production	4,330
Units in ending inventory	270
Units transferred to the next department	4,490

	Materials		Conversion
Percentage completion of beginning inventory	60	%	40	%
Percentage completion of ending inventory	80	%	50	%

The cost of beginning inventory according to the company’s costing system was $7,896 of which $4,808 was for materials and the remainder was for conversion cost. The costs added during the month amounted to $182,483. The costs per equivalent unit for the month were:

	Materials	Conversion
Cost per equivalent unit	$18.00	$23.00

Required:

1. Compute the total cost per equivalent unit for the month.

2. Compute the equivalent units of material and conversion in the ending inventory.

3. Compute the equivalent units of material and conversion that were required to complete the beginning inventory.

4. Compute the number of units started and completed during the month.

5. Compute the cost of ending work in process inventory for materials, conversion, and in total for the month.

6. Compute the cost of the units transferred to the next department for materials, conversion, and in total for the month.

Answer 1

1. Total cost per equivalent unit = Cost per equivalent unit for materials + Cost per equivalent unit for conversion = $18 + $23 = $41

2. Equivalent units of material and conversion in ending inventory

Materials: 270 x 80% = 216

Conversion: 270 x 50% = 135

3. Equivalent units of material and conversion required to complete beginning inventory

Materials: 430 x 40% = 172

Conversion: 430 x 60% = 258

4. Number of units started and completed = Number of units transferred to the next department - Number of units in beginning inventory = 4490 - 430 = 4060

5. Cost of ending work in process inventory

Materials (216 x $18)	3888
Conversion (135 x $23)	3105
Total cost of ending work in process inventory $	6993

6. Cost of units transferred to the next department

	Materials	Conversion	Total
Cost of beginning work in process	4808	3088	7896
Cost incurred on beginning work in process	3096	5934	9030
	(172 x $18)	(258 x $23)
Cost of units started and completed	73080	93380	166460
	(4060 x $18)	(4060 x $23)
Total cost of units transferred $	80984	102402	183386