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	$	962
Conversion costs		497
Current period costs
Direct materials		19,320
Conversion costs		14,994

Quantity information is obtained from the manufacturing records and includes the following:

Beginning inventory	600	units	(70% complete as to materials, 55% complete as to conversion)
Current period units started	5,500	units
Ending inventory	1,700	units	(50% complete as to materials, 20% complete as to conversion)

Required:

(1) Compute the equivalent units for the materials and conversion cost calculations.

(2) Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. (Round your answers to 2 decimal places.)

Answer 1

1. Compute the equivalent units for the material & conversion cost callculation

	Physcial Units	%	material	%	Conversion Cost
Begaining work in progress	600	30%	180	45%	270
Units Started & Completed	3800	100%	3800	100%	3800
Ending work in progress	1700	50%	850	20%	340
Total equivalent unit			4830		4410

2. Compute the cost per equivalent unit for direct materials & for conversion cosr using the FIFO method

	Material	Conversion Cost
Cost added during the period	$19320	$14994
Equivalent Unit	4830	4410
Cost per equivalent Unit	$4.00	$3.40