Question

Problem 4A-11 Equivalent Units of Production; Cost per Equivalent Unit; Assigning Costs-FIFO Method [LO4-6, LO4-7, LO4-8, LO4-9]

Sunspot Beverages, Ltd., of Fiji uses the FIFO method in its process costing system. It makes blended tropical fruit drinks in two stages. Fruit juices are extracted from fresh fruits and then blended in the Blending Department. The blended juices are then bottled and packed for shipping in the Bottling Department. The following information pertains to the operations of the Blending Department for June.

		Percent Completed
	Units	Materials		Conversion
Work in process, beginning	20,000	100	%	75	%
Started into production	180,000
Completed and transferred out	160,000
Work in process, ending	40,000	100	%	25	%

	Materials		Conversion
Work in process, beginning	$	25,200	$	24,800
Cost added during June	$	334,800	$	238,700

Required:

1. Compute the Blending Department's equivalent units of production for materials and conversion for June.

2. Compute the Blending Department's cost per equivalent unit for materials and conversion for June.

3. Calculate the Blending Department's cost of ending work in process inventory for materials, conversion, and in total for June.

4. Calculate the Blending Department's cost of units transferred out to the next department for materials, conversion, and in total for June

5. Prepare a cost reconciliation report for the Blending Department for June.

Answer 1

Solution

	Material	Conversion
Equivalent Units of Production	180,000	155,000

.

	Material	Conversion
Cost per equivalent Unit	$             1.86	$                   1.54

.

	Material	Conversion	Total
Cost of Ending Inventory	$ 74,400	$ 15,400	$ 89,800

.

	Material	Conversion	Total
Cost of Units Completed and transferred out	$ 285,600	$ 248,100	$ 533,700

.

Cost reconciliation
Costs to be accounted for:
Beginning Wip cost	$ 50,000
Cost incurred during period	$ 573,500
Total cost to be accounted for	$ 623,500
Costs accounted for as follows:
Cost of Units Transferred Out	$ 533,700
Cost of Ending Wip	$ 89,800
Total cost accounted for	$ 623,500

Working

STEP 1 (FIFO)
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	20,000	100%	75%	0%	25%
Units introduced	180,000
Total units to be accounted for	200,000
Completed and Transferred unit	160,000	0%	0%	100%	100%
Ending WIP	40,000	0%	0%	100%	25%

.

STEP 2 (FIFO)
Equivalent Units
	Total Units	Material		Conversion cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	20,000	0%	-	25%	5,000
From units started/Introduced	140,000	100%	140,000	100%	140,000
Total	160,000		140,000		145,000
	Total Units	Material		Conversion cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	40,000	100%	40,000	25%	10,000
Total EUP	200,000		180,000		155,000

.

STEP 3
Cost per Equivalent Units AND Cost to be accounted for
	Material		Conversion cost		TOTAL
Cost incurred in Current Period	$ 334,800		$ 238,700		$ 573,500
Total Equivalent Units	180,000		155,000
Cost per Equivalent Units	$ 1.86		$ 1.54		$ 3.40
Cost of Beginning WIP	$ 25,200		$ 24,800		$ 50,000
Total cost to be accounted for					$ 623,500

.

STEP 4
Cost report [Including Reconciliation]
	Cost of	Units Transferred		160,000.00	units
		Equivalent Units [Step 2]	Cost per Equivalent Units [Step 3]	Cost of Units Transferred	TOTAL
A	From Beginning WIP:
	Material	-	$ 1.86	$ 0
	Conversion cost	5,000	$ 1.54	$ 7,700	$ 7,700
B	From units started & completed
	Material	140,000	$ 1.86	$ 260,400
	Conversion cost	140,000	$ 1.54	$ 215,600	$ 476,000
C=A+B	Total				$ 483,700
D	Cost of Beginning WIP				$ 50,000
E=C+D	Total Cost of Units transferred				$ 533,700
	Cost of	Ending WIP		40,000.00	units
		Equivalent Units [Step 2]	Cost per Equivalent Units [Step 3]	Cost of Ending WIP	TOTAL
F	Material	40,000	$ 1.86	$ 74,400
G	Conversion cost	10,000	$ 1.54	$ 15,400
H = F + G	Total Cost of Ending WIP				$ 89,800
I = E + H	Total Cost accounted for				$ 623,500
J	Rounding Off Differences				$ 0
K = I + J	Total cost to be accounted for [equals to computed in STEP 3]				$ 623,500