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	$	980
Conversion costs		287
Current period costs
Direct materials		11,285
Conversion costs		7,287

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

Beginning inventory	500	units	(60% complete as to materials, 56% complete as to conversion)
Current period units started	4,100	units
Ending inventory	1,000	units	(40% complete as to materials, 15% complete as to conversion)

Required:

a. Compute the equivalent units for the materials and conversion cost calculations.

b. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.

Answer 1

a)	Equivalent Units of Material	3700
	Equivalent units for conversion costs	3470
b)	Cost per equivalnet unit
	Materials	3.05
	Convesrion Costs	2.10
	The Matsui Lubricants
	Production Cost Report (FIFO)
		Actual Units
	Calculation of Physical UNITS:
	Units in beginning inventory	500
	Units started during the period	4100
	Units to be accounted for	4600
		Actual Units	Equivalent Units
			Material	CC
	Units Completed and Transferred	3600
	From units in beginning inventory	500	200	220
	From units started	3100	3100	3100
	Units in ending inventory	1000	400	150
	Equivalent Unit of production	4600	3700	3470
	Costs:
		Total	Material	CC
	Costs in beginning inventory	0	0	0
	Cost added during the year	18572	11285	7287
	Total cost to account for	18572	11285	7287
	Equivalent Units from above		3700	3470
	Cost per equivalent unit	5.15	3.05	2.10
		Total	Material	CC
	Cost Accounted for
	Units completed and transfer	0	0	0
	From units in beginning inventory	1,072	610	462
	From units started	15,965	9,455	6,510
	Total Cost of units transferred out	17,037	10,065	6,972
	Units in ending inventory	1,535	1,220	315
	Total Cost Accounted for	18,572	11,285	7,287