Question

First-In, First-Out Method; Equivalent Units

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Production:
Units in process, July 1, 80% complete		30,000 gallons
Units completed and transferred out		195,000 gallons
Units in process, July 31, 75% complete		12,000 gallons
Costs:
Work in process, July 1		$ 48,000
Costs added during July		390,000

Required:

1. Calculate the equivalent units for July.
equivalent units

2. Calculate the unit cost. Round your answer to the nearest cent.
$per unit

3. Assign costs to units transferred out and EWIP using the FIFO method. Note: Do not round interim computations.

Cost of units transferred out	$
Ending work in process	$

Answer 1

1. equivalent units for July. equivalent units
Opening WIP (20% completed in current month)	6,000
New units completely produced during current month (Total Units trasfered out -Opening units completed during current month) (195000-30000)	1,65,000
Closing WIP (75% completed in current month)	9,000
Equivalent units	1,80,000
2. unit cost
Costs added during July (A)	3,90,000
Equivalent units (B)	1,80,000
equivalent cost/unit (A/B)	2
3. Cost of units transferred out
Cost of opening WIP (80% complete)	48,000
Cost of remaining 20% (30,000 * 20% * 2.17)	13,020
Total cost of opening 30,000 units and transfer out	61,020
Cost of new 165,000 units introduced and transfer out	3,57,500
Total Cost of units transferred out	4,18,520
Ending work in process (12,000 * 75% * 2.17/unit)	19,530