Question

Steelcase Company manufactures tables for business and home offices. The manufacturing process involves the Production Department and the Quality Control Department, during which each table coming out of the Production Department is immediately transferred to the Quality Control Department.

The company’s process-costing system requires two cost categories being direct materials and conversion costs. Direct materials are added at the beginning of the process when the degree of completion for direct materials is determined. Conversion costs are added evenly during the process.

The table below shows the relevant data for the Production Department for November 2020.

	Physical Units (tables)	Direct Material Costs	Conversion Costs
Work in process, 1 November 2020 (*) Started during November 2020 Completed during November 2020 Work in process, 30 November 2020 (**) Costs added during November 2020	12000 23 000 30 800 4 200	$14 000 - - - - $38 000	$8 000 - - - - $24 000

Note:

(*) Degree of completion: 100% for direct materials and 40% for conversion cost (**) Degree of completion: 100% for direct materials and 35% for conversion cost

Required:
Determine the cost per equivalent unit for the Steelcase Company’s direct materials and conversion costs,

and the total unit cost for the current period, under the FIFO method. Show all workings. Templates are provided over the page for use

Answer 1

Answer

• Working

Units Reconciliation
Units to account for:
Beginning WIP	12,000
Units started this period	23,000
Total Units to account for	35,000
Total Units accounted for:
Completed & Transferred out	30,800
Ending WIP	4,200
Total Units accounted for	35,000

• Answer calculation: Cost per Equivalent unit

EUP - FIFO Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units of ENDING WIP	4,200	100.0%	4,200	35.0%	1,470
Units STARTED & COMPLETED	18,800	100%	18,800	100%	18,800
Units of beginning WIP	12,000	0.00%	-	60%	7,200
Equivalent Units of Production			23,000		27,470
COST per EUP			Material		Conversion
Cost incurred this period			$          38,000.00		$                    24,000.00
Total Costs		Costs	$          38,000.00	Costs	$                    24,000.00
Equivalent units of production		EUP	23,000	EUP	27,470
Cost per EUP			$                1.6522		$                          0.8737