Question

The Matsui Lubricants plant uses the FIFO method to account for its work-in- process inventories. The accounting records show the following information for a particular day. Beginning WIP inventory Direct materials $ 980 Conversion costs 287 Current period costs Direct materials 11,285 7,287 Conversion costs Quantity information is obtained from the manufacturing records and includes the following. (60% complete as to materials, 56% complete as to conversion) Beginning inventory 500 units Current period units started Ending inventory 4,100 units 1,000 units (40% complete as to materials, 15% complete as to conversion) Exercise 8-35 (Algo) Compute Costs per Equivalent Unit: FIFO Method (LO 8- 5) Required: a. Compute the equivalent units for the materials and conversion cost calculations. b. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.

Answer 1

Solution

	Material	Conversion
Equivalent Units of Production	3,700	3,470

.

	Material	Conversion
Cost per equivalent Unit	$             3.05	$                   2.10

Working

STEP 1 (FIFO)
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	500	60%	56%	40%	44%
Units introduced	4,100
Total units to be accounted for	4,600
Completed and Transferred unit	3,600	0%	0%	100%	100%
Ending WIP	1,000	0%	0%	40%	15%

.

STEP 2 (FIFO)
Equivalent Units
	Total Units	Material		Conversion cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	500	40%	200	44%	220
From units started/Introduced	3,100	100%	3,100	100%	3,100
Total	3,600		3,300		3,320
	Total Units	Material		Conversion cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	1,000	40%	400	15%	150
Total EUP	4,600		3,700		3,470

.

STEP 3
Cost per Equivalent Units
	Material		Conversion cost		TOTAL
Cost incurred in Current Period	$ 11,285		$ 7,287		$ 18,572
Total Equivalent Units	3,700		3,470
Cost per Equivalent Units	$ 3.05		$ 2.10		$ 5.15