Question

Daosta inc. uses the fifo method in its process costing system. the following data concern the operations of the company’s first processing department for a recent month. work in process, beginning: units in process 900 percent complete with respect to materials 50 % percent complete with respect to conversion 30 % costs in the beginning inventory: materials cost $ 565 conversion cost $ 2,129 units started into production during the month 23,000 units completed and transferred out 23,000 costs added to production during the month: materials cost $ 55,416 conversion cost $ 612,001 work in process, ending: units in process 900 percent complete with respect to materials 60 % percent complete with respect to conversion 60 % required: using the fifo method: a. determine the equivalent units of production for materials and conversion costs. b. determine the cost per equivalent unit for materials and conversion costs. c. determine the cost of ending work in process inventory. d. determine the cost of units transferred out of the department during the month.

Answer 1

To solve this problem, we will use the FIFO (First-In, First-Out) method. The equivalent units of production for materials and conversion costs are 540 units. The cost per equivalent unit for materials is $102.44 and for conversion costs is $1,133.34.

Step-by-step explanation:

To solve this problem, we will use the FIFO (First-In, First-Out) method.

a. To determine the equivalent units of production for materials and conversion costs, we need to calculate the equivalent units for each category. The equivalent units for materials can be calculated by multiplying the units in process by the percentage complete with respect to materials. In this case, the equivalent units for materials would be 900 units x 60% = 540 units. Similarly, the equivalent units for conversion costs can be calculated by multiplying the units in process by the percentage complete with respect to conversion. In this case, the equivalent units for conversion costs would be 900 units x 60% = 540 units.

b. To determine the cost per equivalent unit for materials and conversion costs, we divide the total cost of materials and conversion by the equivalent units calculated in part a. The cost per equivalent unit for materials would be $55,416 / 540 units = $102.44. The cost per equivalent unit for conversion costs would be $612,001 / 540 units = $1,133.34.

c. To determine the cost of ending work in process inventory, we multiply the equivalent units for materials and conversion costs by the cost per equivalent unit. The cost of ending work in process inventory for materials would be 540 units x $102.44 = $55,305.60. The cost of ending work in process inventory for conversion costs would be 540 units x $1,133.34 = $611,607.60.

d. To determine the cost of units transferred out of the department during the month, we multiply the units completed and transferred out by the cost per equivalent unit for materials and conversion costs. The cost of units transferred out would be 23,000 units x $102.44 = $2,356,120 for materials and 23,000 units x $1,133.34 = $26,053,820 for conversion costs.