Question

Easy inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Required:

Using the FIFO method.

a. Determine the equivalent units of production for materials and conversion costs.

b. Determine the cost per equivalent unit for materials and conversion costs.

c. Determine the cost of ending work in process inventory.

d. Determine the cost of units transferred out of the department during the month)

Answer 1

A. Equivalent units of production, Materials=23,810 and Conversion= 24,690;

B. Cost per equivalent unit, Materials=$3.08 and Conversion=$22.06;

C. Cost of Ending WIP = $17,598;

D. Cost of units transferred out = $578,211.

*FIFO Method:
*It assigns the cost of the previous period's equivalent units in beginning WIP to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, Then to start and complete new units, and finally to units in ending WIP inventory.
*FIFO costing method is that work done on beginning inventory before the current period is kept
separate from work done in the current period.
*Equivalent units in Beginning WIP + Equivalent units of work done in current period = Equivalent units in Beginning WIP + Equivalent units completed and transferred out in current period + Equivalent units in Ending WIP.