Question

Cost Information and FIFO

Gunnison Company had the following equivalent units schedule and cost information for its Sewing Department for the month of December:

	Direct Materials		Conversion Costs
Units started and completed	50,000		50,000
Add: Units in beginning work in process ×
Percentage complete:
5,000 × 0% direct materials	—
5,000 × 50% conversion Costs			2,500
Add: Units in ending work in process ×
Percentage complete:
14,000 × 100% direct materials	14,000		—
14,000 × 35% conversion Costs	—		4,900
Equivalent units of output	64,000		57,400
Costs:
Work in process, December 1:
Direct Material			$45,000
Conversion Costs			15,000
Total Work in process			$60,000
Current costs:
Direct Material			$640,000
Conversion Costs			114,800
Total current costs			$754,800

Required:

1. Calculate the unit cost for December, using the FIFO method.
$  per equivalent unit

2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for.

Cost of goods transferred out	$
Cost of EWIP	$

Cost to account for:
BWIP	$
Current (December)
Total	$

3. What if you were asked for the unit cost from the month of November?

Calculate November's unit cost.
$  per equivalent unit

Answer 1

Answer 1
Calculation of Equivalent units using FIFO method
	Physical Units	% complete with respect to Direct Material cost	Equivalent units for Direct Material cost	% complete with respect to Conversion cost	Equivalent units for Conversion cost
Beginning WIP	5000	0%	0	50%	2500
Units started and completed	50000	100%	50000	100%	50000
Ending WIP	14000	100%	14000	35%	4900
Equivalent Units			64000		57400
Calculation of cost per equivalent unit using FIFO method
		Direct Material	Conversion
Current cost		$640,000.00	$114,800.00
/ Equivalent Units		64000	57400
Cost per equivalent unit		$10.00	$2.00
Answer 2
Cost of goods transferred out
		Direct Material	Conversion	Total
Beginning WIP		$45,000.00	$15,000.00	$60,000.00
Cost incurred to complete Beginning WIP			$5,000.00	$5,000.00
Cost of units started and completed'		$500,000.00	$100,000.00	$600,000.00
Cost of goods tranferred out				$665,000.00
Cost of ending WIP
		Direct Material	Conversion	Total
Cost of ending WIP		$140,000.00	$9,800.00	$149,800.00
Cost fo ending WIP				$149,800.00
Total				$814,800.00
Cost to account for
BWIP				$60,000.00
Current (December)				$754,800.00
Total				$814,800.00
Answer 3
Calculation of unit cost for the month of November
		Direct Material	Conversion
Cost of BWIP		$45,000.00	$15,000.00
/ Equivalent units of BWIP		5000	2500
Unit cost for the month of November		$9.00	$6.00