Question

Richards Corporation uses the FIFO method of process costing. The following available for October in its Fabricating Department: Units: Beginning Inventory: 82,000 units, 70% complete as to materials and 25% complete as to conversion Units started and completed: 252,000. Units completed and transferred out: 334,000. Ending Inventory: 31,000 units, 40% complete as to materials and 15% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $39,200. Costs in beginning Work in Process - Conversion: $81,700. Costs incurred in October - Direct Materials: $718.480. Costs incurred in October - Conversion: $995,580. Calculate the cost per equivalent unit of conversion.

Answer 1

*Cost per equivalent unit of conversion = $3.75

Workings:

1 FIFO-Equivalent production Costs charged to production: Cost of Beginning WIP Cost added to production during the period Total Cost to be accounted for: Total costs accountred for *Difference due to rounding cost/unit $ $ 120,900 1,714,060 1,834,960 1,834,960 $ $ $ Unit Reconcilation Beginning Work in Process Inventory Started this period Cost Charged to account for: Beginning Work in Process Inventory, Completed and Transferred out Ending Work in Process Inventory, Total units accounted for: 82,000 252,000 334,000 82,000 221,000 Balance 31,000 334,000 a. Equivalent units of production Beginning Work in Process Inventory, Completed and Transferred out Ending Work in Process Inventory, Total Equivalent Units Units 82,000 221,000 31,000 334,000 % of Material 30% 100% 40% EUP-Material 24,600 221,000 12,400 258,000 %Conversion 75% 100% 15% EUP -Conversion 61,500 221,000 4,650 287,150 b. Cost per Equivalent unit of production Beginning WIP Started 82,000 252,000 334,000 $ $ $ EUP-Material 39,200.00 718,480.00 757,680.00 258000 $ $ $ EUP -Conversion 81,700 995,580 1,077,280 287,150 3.75 S Costs Total Costs Div, Equivalent units Cost per Equivalent unit of production Costs EUP EUP $ 2.94 6.69

EUP Cost per EUP Total costs Total costs accounted for: Cost of Beginning WIP: Beginning Work in Process Inventory, Direct Material Conversion cost 72,244 la 24,600 $ 61,500 $ 2.94 3.75 $ S 230,725 $ 302,969 Cost of units transferred out: Direct Material Conversion cost EUP Cost per EUP 221,000 $ 2.94 S 221,000 $ 3.75 S Total costs 649,020 829,110 $ 1,478,130 d. EUP Cost of Ending WIP: Direct Material Conversion cost Cost per EUP 12,400 $ 2.94 4,650 $ 3.75 S Total costs 36,416 17,445 $ $ $ 53,861 1,834,960 Total costs accounted for e. $ $ $ Cost Reconcilation Costs to be accounted for: Cost of beginning WIP Cost added to production during the period Total Cost to be accounted for: Costs accounted for as follow: Cost of Beginning WIP: Costs of units transferred out Cost of Ending WIP Total Cost to be accounted for: 120,900 1,714,060 1,834,960 S $ $ $ 302,969 1,478,130 53,861 1,834,960

*FIFO:
*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.

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