Question

Schiller Company has unit costs of $2 for materials and $6 for conversion costs. There are 5,600 units in ending work in process which are 25% complete as to conversion costs, and fully complete as to materials cost. How much is the total cost assigned to the ending work in process inventory if the FIFO method is used?

Answer 1

Answer:

$19,600

Explanation:

Using the FIFO method, only 25% of the inventory should be valued at full cost (conversion + materials), while the remaining 75% of the 5,600 units should be valued only at the materials cost, since conversion is still required. The total cost assigned to ending work in process inventory is:

$WIP = 5,600*0.25*(\ 2+\ 6)+5,600*0.75*\ 2\\WIP=\ 19,600$

The total cost is $19,600.