Question

FIFO METHOD – PRODUCTION REPORT (MUST SHOW CALCULATIONS OR NO CREDIT)

The accounting and production records for the company show the following information:

Work in Process, June 1                                                                                                                             10,000 units

(Direct materials 100% complete; labor & overhead 70% complete)

Units started                                                                                                                                   60,000 units

Work in Process, June 30                                                                                                          4,000 units

(Direct materials 100% complete; labor & overhead 60% complete)

SUMMARY OF COSTS – Work-in-Process Account:

June 1, beginning inventory, materials                                                                                           $ 32,000

June 1, beginning inventory, labor & overhead                                                                         $ 36,000

June, added costs: materials used                                                                                  $180,000

June, added costs: labor & overhead (conversion cost)                                                      $307,000

June 30, Work-in-Process Account balance:                                                              $555,000

COMPLETE PRODUCTION REPORT USING FIFO METHOD and then answer questions using your numbers

1. Total cost of units transferred out = _________________________________________________

2. Total cost of units in ending inventory=______________________________________________

3. Calculate manufacturing cost(s) per unit of units transferred out using:

STRICT FIFO ____________________________________________________________

MODIFIED FIFO__________________________________________________________

Answer 1

Total Cost of Units Transffered out is $ 531,000 under FIFO Method. Justification has been provided below

Calculation of Total Units transferred
Particulars	Units
Opening WIP	10,000
Opening Finished Goods	-
Add:-
Units introduced	60,000
	70,000
Less:-
Closing WIP	4,000
Closing Finished Goods	-
	4,000
Units transferred	66,000

Statement of Equivalent Production (FIFO method )
Inputs	Outputs	Equivalent Output
Particulars	Units	Particulars	Units	Direct Material	Labour & Overhead
%	Units	%	Units
Opening W I P	10,000	Opening W I P	10,000	0	-	30%	3,000
Opening Finished Goods	-	Units introduced and completed (Considering FIFO Method	56,000	100%	56,000	100%	56,000
New Units introduced	60,000	Closing W I P	4,000	100%	4,000	60%	2,400
Total	70,000	Total	70,000		60,000		61,400

Statement of Cost per Equivalent units (Under FIFO method) (In $)
Element of Cost	Cost of processing during month (A)	Equivalent Units (In No.)(B)	Cost per unit (A/B)
Direct Material	1,80,000	60,000	3.00
Labour & OH	3,07,000	61,400	5.00
Total Cost	4,87,000		8.00

Cost assigned to Units completed and transferred (Under FIFO method)
Element of cost	Equivalent Units (A) (In No.)	Cost per equivalent unit (B)	Total Cost (A*B) (In $)
Opening WIP
Material	-	-	32,000
Labour& OH	-	-	36,000
Added costs
Direct Material	56000	3.00	1,68,000
Labour & OH	59000	5.00	2,95,000
Total Cost			5,31,000

Total cost of Units in ending is $ 24,0000 under FIFO Method. Justification has been provided below :-

Cost assigned to Closing working in process (Under FIFO method)
Element of cost	Equivalent Units (A) (In No.)	Cost per equivalent unit (B)	Total Cost (A*B) (In $)
Direct Material	4000	3.00	12,000
Labour & OH	2400	5.00	12,000
Total Cost			24,000

Manufacturing Cost per unit

a.) Under Strict FIFO Method

Cost Sheet
Sno.	Particulars	In Units (In No.)	Amount (In $)
1	Direct material purchased	60,000	1,80,000
2	Add:- Opening DM	-	-
3	Less:- Closing DM	-	-
4	Material consumed	60,000	1,80,000
5	Labour and Overhead		3,07,000
6	Total cost during the period	60,000	4,87,000
7	Add:-Opening WIP	10,000	68,000
8	Less:- Closing WIP	4,000	32,467
9	Manufacturing Cost	66,000	5,22,533

Manufacturing Cost under Strict FIFO Method = Manufacturing Cost/ Units Transferred = 522,533/66,000 = 7.92

B.) Under Modified FIFO Method

Modified FIFO Method means the method of cost assignment that uses FIFO to compute a cost per equivalent unit but, in transferring units from a department,the costs of the beginning inventory units and the units started and completed are combined and averaged.

It means Cost per unit = 531,000/66,000 = 8.045.