Question

A department using the FIFO method for process costing begins the month with 10,000 units which were 70% complete at the end of the previous month. They started and completed 50,000 units and their ending work in process inventory consisted of 5,000 units which were 10% complete. The costs incurred were $200,000.
Required:
A) The cost per equivalent unit of production, using the FIFO method is $ ____________ . Round your answer to two decimal places.

Answer 1

Answer:

$3.74 per equivalent unit

Explanation:

beginning WIP 10,000 units, which were 70% complete = 7,000 equivalent units

units started and completed during the month 50,000

ending WIP 5,000, which were 10% complete = 500 equivalent units

costs incurred = $200,000

under FIFO, total equivalent units:

beginning WIP completed (100% - 70%) x 10,000 = 3,000 units

+ units started and completed 50,000 units

+ ending WIP 5,000 x 10% = 500                          

total units = 53,500 equivalent units

cost per equivalent unit = $200,000 / 53,500 = $3.738 or $3.74 per equivalent unit