Question

Refer to the information in Exercise 16-12. Prepare a process cost summary using the FIFO method. (Round cost per equivalent unit calculations to two decimal places.)

Short answer

Cost per equivalent unit:

Material:$11 Per unit

Conversion:$5.84 per unit

Step-by-step solution

Definition of FIFO

FIFO can be defined as a method used to calculate the ending inventory and the cost of goods sold for a business entity. In this method, the business entity assumes that the goods acquired are sold out first.

Cost summary under the FIFO method

Calculation of equivalent units of production:

Particular	Material	Conversion
Equivalent units under weighted average method	34,500	33,500
Less: Equivalent units in beginning inventory
Material 100% of 2,000 units	(2,000)
Conversion 60% of 2,000 units		(1,200)
Equivalent units under FIFO method	32,500	32,300

Calculation of cost per equivalent units:

Particular	Material	Conversion
Cost incurred during the period	$357,500	$188,670
Equivalent units under FIFO method	32,500	32,300
Cost per equivalent units	$11 per unit	$5.84 per unit

Calculation of cost of ending work-in-process and units transferred out

Cost assigned to ending work-in-process

Particular	Material	Conversion	Total
Equivalent units	2,500	1,500	4,000
Cost per equivalent units	$11	$5.84
Cost assigned to ending work-in-process	$27,500	$8,760	$36,260

Cost assigned to units-transferred out:

Particular	Material	Conversion	Total
Cost in the beginning work-in-process (A)	$18,550	$2,280	$20,830
Equivalent units required for completing the beginning work in process	0 units	800 units	800 units
Cost per equivalent units	$11	$5.84
Cost required to complete the units in beginning work-in-process (B)	$0	$4,672	$4,672
Units started and completed this period $\mathbf{(}\mathbf{32}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{2}\mathbf{,}\mathbf{000}\mathbf{)}$	30,000	30,000
Cost per equivalent units	$11	$5.84
Cost of units started and completed this period (C)	$330,000	$175,200	$505,200
Total cost of units transferred out $\mathbf{(}\mathbf{A}\mathbf{+}\mathbf{B}\mathbf{+}\mathbf{C}\mathbf{)}$			$530,702

Working note:

Calculation of units accounted for

Particular	Material	Conversion
Units transferred out	32,000	32,000
Work-in-process ending inventory	2,500	1,500
Total units accounted for	34,500	33,500

Calculation of total units:

Particular	Units
Work-in-process in June	2000
Started into production	32,500
Total units	34,500

Cost reconciliation statement

Cost to be accounted for	Amount $	Cost accounted for	Amount $
Cost of beginning WIP	$20,830	Cost of ending WIP	$36,260
Cost added to production	546,132	Cost of units transferred out	530,702
Total cost to be accounted for	$566,962	Total cost to be accounted for	$566,962