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 $ 955

Conversion costs 467

Current period costs

Direct materials 15,180

Conversion costs 12,557

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

Beginning inventory 500 units (60% complete as to materials,

54% complete as to conversion)

Current period units started 5,300 units

Ending inventory 1,500 units (40% complete as to materials,

20% complete as to conversion)

(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.)

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

Answer 1

Units completed and transfered out :Beginning WIP +Started - ending WIP

           = 500+5300-1500

           = 4300Units

Under FIFO units acquired first are sold first ,so out of units transfered ,beginning WIP will be transfered first from units completed and transfered out and then from current period producion.

1)

	Material	conversion
Beginning WIP	200      [500(1-.60already complete)]	230   [500(1-.54)]
units transfered from current period production [4300-500]	3800	3800
Ending WIP	600      [1500*.40]	300     [1500*.20]
Equivalent unit	4600	4330

2)

	Material	conversion
current period cost [A]	15180	12557
equivalent unit [B]	4600	4330
cost per equivalent unit [A/B]	3.3	2.90

3)

	Material	conversion	Total
cost of units transfered out
Beginning WIP	955	467
Current period cost
Beginning WIP	200*3.3=660	230*2.9=667
Current period units	3800*3.3= 12540	3800*2.9= 11020
TOtal cost of unit transfered out	14155	12154	26309
Cost of ending work inprocess	600*3.3= 1980	300*2.9= 870	2850