Question

Self-Study Problem 6-1 Weighted-Average Method versus FIFO Method

Smith Electronic Company’s chip-mounting production department had 300 units of unfinished product, each 50% completed on September 30. During October of the same year, this department put another 800 units into production and completed 900 units and transferred them to the next production department. At the end of October, 200 units of unfinished product, 70% completed, were recorded in the ending Work-in-Process Inventory. Smith Electronic introduces all direct materials when the production process is 50% complete. Direct labor and factory overhead (i.e., conversion) costs are added uniformly throughout the process.

Following is a summary of production costs incurred during October:

	Direct Materials				Conversion Costs
Beginning work-in-process					$	3,750
Costs added in October	$	9,600				4,200
Total costs	$	9,600			$	7,950

Required:

1. Calculate each of the following amounts using the FIFO:
a. Equivalent units of direct materials and conversion.
b. Equivalent unit costs of direct materials and conversion.
c. Cost of goods completed and transferred out during the period.
d. Cost of Work-in-Process Inventory at the end of the period.

2. Prepare a production cost report for October using the FIFO method.

Answer 1

Solution 1 &2:

Smith Electronic Company
Chip Mounting Production Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	300
Units started this period	800
Total unit to be accounted for	1100
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 100% Conversion - 50%	300	300	150
Started and completed currently	600	600	600
Transferred to finished goods	900	900	750
Units in ending WIP Material - 100% Conversion - 70%	200	200	140
Total units accounted for	1100	1100	890

Smith Electronic Company
Chip Mounting Production Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$13,800.00	$9,600.00	$4,200.00
Equivalent units		1100	890
Cost per equivalent unit		$8.73	$4.72

Smith Electronic Company
Chip Mounting Production Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$3,750	$0	$3,750
Current cost added to complete beginning WIP:
Material (300*$8.73)	$2,618	$2,618
Conversion (150 * $4.72)	$708		$708
Total Cost from beginning inventory	$7,076	$2,618	$4,458
Current cost of unit started and completed:
Material (600*$8.73)	$5,236	$5,236
Conversion (600*4.72)	$2,831		$2,831
Total cost of unit started and completed	$8,068	$5,236	$2,831
Total cost of unit transferred out	$15,144	$7,855	$7,289
Cost assigned to ending WIP:
Material (200*$8.73)	$1,745	$1,745
Conversion (140*$4.72)	$661		$661
Total ending WIP inventory	$2,406	$1,745	$661
Total cost accounted for	$17,550	$9,600	$7,950