Question

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 98,000 units, 80% complete as to materials and 20% complete as to conversion. Units started and completed: 268,000. Units completed and transferred out: 366,000. Ending Inventory: 39,000 units, 30% complete as to materials and 15% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $55,200. Costs in beginning Work in Process - Conversion: $97,700. Costs incurred in October - Direct Materials: $844,050. Costs incurred in October - Conversion: $937,300. Calculate the cost per equivalent unit of materials.

Answer 1

Answer:

Cost per equivalent unit Materials =  $ 2.82

Cost per equivalent unit Conversion =  $2.65

Explanation:

Richards Corporation

1) We first calculate the fifo equivalent units .

FIFO Equivalent units can be calculated by the following.

Particulars          Units        % of Completion             Equivalent Units

                                              Mat. Con. Costs       Materials C. Costs

Transferred out, 366,000        100       100             366,000   366,000

Ending inventory, 39,000         30         15              11700         5850

Total Weighted Equivalent Units                           377,700     371,850

Less

Beginning Inventory: 98,000, 80%  20%             78,400        18000

FIFO Equivalent Units                                          299,300       353,850  

2) We calculate the total costs

                                                   Direct Materials  Conversion

Costs in beginning Work in Process -$55,200       $97,700

Costs incurred in October -                 $844,050      $937,300.

Total Cost                                           $ 899250         1035,000  

3) In FIFO The cost per unit is  based only on the current costs and current period unit productions.

Materials = $844050/299300= $2.82

Conversion = 937,300  / 353,850   = 2.6488= $2.65