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	$	1,010
Conversion costs		527
Current period costs
Direct materials		22,540
Conversion costs		15,283

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

Beginning inventory	700	units	(65% complete as to materials, 55% complete as to conversion)
Current period units started	5,700	units
Ending inventory	1,900	units	(45% complete as to materials, 20% 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	4900
	Equivalent units for conversion costs	4495
b)	Cost per equivalnet unit
	Materials	4.60
	Convesrion Costs	3.40
	The Matsui Lubricants
	Production Cost Report (FIFO)
		Actual Units
	Calculation of Physical UNITS:
	Units in beginning inventory	700
	Units started during the period	5700
	Units to be accounted for	6400
		Actual Units	Equivalent Units
			Material	CC
	Units Completed and Transferred	4500
	From units in beginning inventory	700	245	315
	From units started	3800	3800	3800
	Units in ending inventory	1900	855	380
	Equivalent Unit of production	6400	4900	4495
	Costs:
		Total	Material	CC
	Costs in beginning inventory	0	0	0
	Cost added during the year	37823	22540	15283
	Total cost to account for	37823	22540	15283
	Equivalent Units from above		4900	4495
	Cost per equivalent unit	8.00	4.60	3.40