Question

Nettle Co. uses process costing to account for the production of rubber balls. Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. Equivalent units have been calculated to be 12,000 units for materials and 10,000 units for conversion costs. Beginning inventory consisted of $14,000 in materials and $8,000 in conversion costs. April costs were $72,000 for materials and $80,000 for conversion costs. Ending inventory still in process was 4,000 units (100% complete for materials, 50% for conversion). The cost per unit for materials using the FIFO method would be closest to:

 

A $6.0000

 

B $7.1666

 

C $14.5000

 

D $1.8334

Answer 1

Cost Incurred in April for materials = $72,000

 

Equivalent units of production for material = 12000 (This units are the ones on which whole of $72,000 is incurred as FIFO method is followed)

 

So, The cost per unit for materials using the FIFO method would be closest to:

 

72000 / 12000 = $6.00

 

Answer - A $6.0000

The cost per unit for materials using the FIFO method would be closest to:A $6.0000