Taxes R Us (TRU), an income tax preparation firm, uses the FIFO method of process costing...

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Taxes R Us (TRU), an income tax preparation firm, uses the FIFO method of process costing for its monthly reports. TRU has no

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Answer 1

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Calculation of amounts for conversion costs using the FIFO method

	Particulars	Explanation
1.	Number of equivalent units (tax returns)	Refer working note - (1)	2310
2.	Cost per equivalent unit	Refer working note - (2)	$110
3.	Cost of completed tax returns for month of March	Refer working note - (3)	$216040
4.	Cost of tax returns in process as of March 31	Cost per equivalent unit * (Returns in process, March 31 (90% complete) = $110 * (440 * 90%)	$43560

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# Working note - (1) - Number of equivalent units (tax returns) -

	Particulars	Explanation	Tax returns
a.	Returns completed during March	220 + 2200 - 440	1980
b.	Returns in process, March 31	440 * 90%	396
c.	Returns in process, March 1	220 * 30%	66
FIFO equivalent units		a + b - c	2310

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# Working note - (2) - Cost per equivalent unit -

	Particulars	Explanation
a.	Labor and overhead costs incurred in March	Given in question	$254100
b.	FIFO equivalent units	Refer working note - (1)	2310 units
Cost per equivalent unit		a / b	$110

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# Working note - (3) - Cost of completed tax returns for month of March -

	Particulars	Explanation	Amount
a.	Labor and overhead costs for returns in process, March 1	Given in question	$5500
b.	To finish the beginning returns in process	$110 * 220 * (1 - 30%)	$16940
c.	Returns Started and finished	$110 * (1980 - 220)	$193600
Cost of completed tax returns for month of March		a + b + c	$216040

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