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 $ 1,000

Conversion costs 437

Current period costs

Direct materials 15,995

Conversion costs 13,992

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

Beginning inventory 400 units (70% complete as to materials, 55% complete as to conversion)

Current period units started 5,100 units

Ending inventory 1,300 units (50% complete as to materials, 20% complete as to conversion)

Compute the cost of goods transferred out and the ending inventory using the FIFO method. (Do not round intermediate calculations.)

Answer 1

Solution:

Computation of Equivalent Units of Production (FIFO method)
	Whole Units	Equivalent units Direct Materials	Equivalent units Conversion
Beginning Inventory (30% Material, 45% conversion)	400	120	180
Started and completed during current period (5100-1300)	3800	3800	3800
Transferred To finished Goods	4200	3920	3980
Ending Inventory (50% Material, 20% Conversion)	1300	650	260
Total equivalent units	5500	4570	4240

Computation of Cost per Equivalent Units
	Total	Direct Materials	Conversion
Current period cost	$29,987	$15,995	$13,992
/Equivalent Units		4570	4240
Cost per Equivalent unit		$3.50	$3.30

Computation of cost of goods transferred out And Ending Inventory
	Direct Materials	Conversion	Total
Equivalent Units in Goods transferred to Finished Goods	3920	3980
*Cost per Equivalent unit	$3.50	$3.30
Total Cost of goods transferred out	$13,720	$13,134	$26,854
Equivalent units in Ending Inventory	650	260
*Cost per Equivalent unit	$3.50	$3.30
Total Cost of ending Inventory	$2,275	$858	$3,133