Question

Unit cost of materials for a department using the FIFO method of process costing is found by taking the total cost of materials issued to the department during the year divided by a.total units manufactured. b.equivalent units of output. c.units in process. d.units started and completed.

Answer 1

Answer:

b. equivalent units of output.

Explanation:

In the production process there are various kind of inventory, that is raw material inventory, work in process and then the finished inventory.

Thus, there is this equivalent units concepts which calculates the completed units that would have been produced in case of no work in process.

Thus, when we use FIFO method and we want to calculate the unit cost of materials assuming inventory of raw material is also added in stages rather than completely adding it as a first step itself, the correct equation = Total cost of materials/equivalent units of output.