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3 Fraley Chemical Company accounts for its production activities using first-in, first-out (FIFO) process costing. Inventory...

3 Fraley Chemical Company accounts for its production activities using first-in, first-out (FIFO) process costing. Inventory records for the process show a January 1 work-in-process inventory of 10,000 gallons, 80 percent complete as to materials and 40 percent complete as to conversion. The January 31 inventory consisted of 15,000 gallons, 60 percent complete as to materials and 20 percent complete as to conversion. In January, 40,000 gallons were completed and transferred to the finished goods inventory. Costs in the Work-in-Process Inventory account in January are as follows: Materials Conversion Total Costs in beginning inventory $ 1,920 $ 672 $ 2,592 Costs added this period 8,405 5,694 14,099 Total cost to be accounted for $10,325 $6,366 $16,691 a. Using first-in, first-out (FIFO) process costing, calculate the equivalent units (in gallons) for January. b. Using first-in, first-out (FIFO) process costing, calculate the cost per equivalent unit for January. (keep answers to 3 decimal points for calculation of part c) c. Using first-in, first-out (FIFO) process costing, calculate the cost of the 40,000 gallons that were completed and transferred out in January. Show your calculations.

Solutions

Expert Solution

a. Using first-in, first-out (FIFO) process costing, calculate the equivalent units (in gallons) for January.

Materials Conversion
Beginning work in process- units (100%-80%)*10000= 2000 (100%-40%)*10000= 6000
Units started and completed 30000 30000
Ending work in process- units (15000*60%)= 9000 (15000*20%)= 3000
Equivalent units of production 41000 39000

Units started and completed= Units completed and transferred-Beginning work in process- units

= 40000-10000= 30000 units

b. Using first-in, first-out (FIFO) process costing, calculate the cost per equivalent unit for January.

Materials Conversion
Cost added this period $8405 $5694
Equivalent units of production 41000 39000
Cost per equivalent unit $0.205 $0.146

c. Using first-in, first-out (FIFO) process costing, calculate the cost of the 40,000 gallons that were completed and transferred out in January.

Materials Conversion Total
Beginning work in process cost $2592
Cost to completed beginning work in process units:
Materials (2000*$0.205) $410
Conversion (6000*$0.146) 876
Total cost to complete beginning inventory 1286
Cost of units started and completed
Materials (30000*$0.205) 6150
Conversion (30000*$0.146) 4380
Total cost of units started and completed 10530
Cost of units completed and transferred out $14408

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ekkarill92 answered 1 year ago
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