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	$	962
Conversion costs		497
Current period costs
Direct materials		19,320
Conversion costs		14,994

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

Beginning inventory	600	units	(70% complete as to materials, 55% complete as to conversion)
Current period units started	5,500	units
Ending inventory	1,700	units	(50% complete as to materials, 20% complete as to conversion)

Required:

(1) Compute the equivalent units for the materials and conversion cost calculations.

(2) Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. (Round your answers to 2 decimal places.)

(3) Compute the cost of goods transferred out and the ending inventory using the FIFO method. (Do not round intermediate calculations.)

Answer 1

Solution

	Material	Conversion
Equivalent Units of Production	4,830	4,410

.

	Material	Conversion
Cost per equivalent Unit	$             4.00	$                   3.40

.

	Total
Units Completed	$ 31,217
Ending Inventory	$ 4,556

Working

STEP 1 (FIFO)
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	600	70%	55%	30%	45%
Units introduced	5,500
Total units to be accounted for	6,100
Completed and Transferred unit	4,400	0%	0%	100%	100%
Ending WIP	1,700	0%	0%	50%	20%

.

STEP 2 (FIFO)
Equivalent Units
	Total Units	Material		Conversion cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	600	30%	180	45%	270
From units started/Introduced	3,800	100%	3,800	100%	3,800
Total	4,400		3,980		4,070
	Total Units	Material		Conversion cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	1,700	50%	850	20%	340
Total EUP	6,100		4,830		4,410

.

STEP 3
Cost per Equivalent Units AND Cost to be accounted for
	Material		Conversion cost		TOTAL
Cost incurred in Current Period	$ 19,320		$ 14,994		$ 34,314
Total Equivalent Units	4,830		4,410
Cost per Equivalent Units	$ 4.00		$ 3.40		$ 7.40
Cost of Beginning WIP	$ 962		$ 497		$ 1,459
Total cost to be accounted for					$ 35,773

.

STEP 4
Cost report [Including Reconciliation]
	Cost of	Units Transferred		4,400.00	units
		Equivalent Units [Step 2]	Cost per Equivalent Units [Step 3]	Cost of Units Transferred	TOTAL
A	From Beginning WIP:
	Material	180	$ 4.00	$ 720
	Conversion cost	270	$ 3.40	$ 918	$ 1,638
B	From units started & completed
	Material	3,800	$ 4.00	$ 15,200
	Conversion cost	3,800	$ 3.40	$ 12,920	$ 28,120
C=A+B	Total				$ 29,758
D	Cost of Beginning WIP				$ 1,459
E=C+D	Total Cost of Units transferred				$ 31,217
	Cost of	Ending WIP		1,700.00	units
		Equivalent Units [Step 2]	Cost per Equivalent Units [Step 3]	Cost of Ending WIP	TOTAL
F	Material	850	$ 4.00	$ 3,400
G	Conversion cost	340	$ 3.40	$ 1,156
H = F + G	Total Cost of Ending WIP				$ 4,556
I = E + H	Total Cost accounted for				$ 35,773
J	Rounding Off Differences				$ 0
K = I + J	Total cost to be accounted for [equals to computed in STEP 3]				$ 35,773