A manufacturing company uses the FIFO method in its process costing system. In the Cutting Department...

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A manufacturing company uses the FIFO method in its process costing system. In the Cutting Department...

A manufacturing company uses the FIFO method in its process costing system. In the Cutting Department in June, units were 25% complete with respect to conversion in the beginning work in process inventory and 30% complete with respect to conversion in the ending work in process inventory. Other data for the department for June follow:

	units	Conversion costs
Beginning work in process inventory	20,000	50,000
Units started into production during the month	145,000	180,000
Units completed and transferred out	140,000	-
Ending inventory	25,000	-

Required: Calculate the cost per equivalent unit for conversion costs?

business accounting

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Answer 1

Answer #1

Solution: $1.37

Working: Units started and completed = Units completed during the period – Units in beginning inventory = 140,000 - 20,000 = 120,000

Units in ending inventory = Units started into production during the period - Units started and completed = 145,000 - 120,000 = 25,000

FIFO method equivalent units of production
To complete beginning work in process inventory:
Conversion: (20,000 * (100%-80%)	4,000
Units started and completed	120,000
Ending work in process inventory
Conversion: (25,000*30%)	7,500
Equivalent units of production	131,500

FIFO method cost per equivalent unit
Cost added during the period	180,000
Equivalent units of production	131,500
Cost per equivalent unit (180,000 / 131,500)	1.37

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Answer 2

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