Question

FIFO method, assigning costs (continuation of 17-26).

Required:

For the data in Exercise 17-24, use the FIFO method to summarize the total costs to account for, calculate the

cost per equivalent unit for direct materials and conversion costs, and assign costs to units completed (and

transferred out) and to units in ending work in process.

Answer 1

Equivalents units – During Production Process, Units in Work in Progress are partially complete. In order to allocate cost to such units, these are equated to being complete units with respect to the respective costs.

Equivalent units are a derived measure of output calculated using following methods:

1. FIFO Method

2. Weighted Average Method.

FIFO Method– The first in, first out (FIFO) process costing method allocates only the current period costs to the equivalent production carried out during the period. For the beginning Work in Progress, the total cost is the cost relating to last year carried forward plus the cost allocated to balance production completed in the current year.

a. Calculation of Equivalent Units is as follows:

Solution for above is provided below:

b. Total Cost Summary and Cost per Unit is as follows:

Solution for above is as follows:

c. Assignment of Costs to Transferred Goods and Ending Work in Process is as follows:

Solution for above is provided below: