Question

Matrix Inc. calculates cost for an equivalent unit of production using both the weighted-average and the FIFO methods.

Answer 1

Answer:

c) $3.00

Explanation:

The FIFO method assumes that the cost of the Beginning Work In Process will automatically go towards the completed units, because the units that were incomplete for the previous period are the first to be completed in the current period. Thus, we are only interested in the current costs instead of getting a weighted average (combining the cost of last year in beginning inventory and the cost of the current period).

Step 1

Calculate the equivalent units

To finish Beginning work in Process (36,000 x 50%) =  18,000

Started and Completed (102,000 - 36,000) x 100%    = 66,000

Ending Work In Process (24,000 x 50%)                      = 12,000

Equivalent units of production for conversion Costs   = 96,000

Step 2

Determine the Conversion Costs for the Current period  

Conversion Costs incurred = $288,000

Step 3

Determine the Cost per equivalent unit for conversion costs

Cost per equivalent unit = Total Cost ÷ Total Equivalent units

therefore,

Cost per equivalent unit = $288,000 ÷ 96,000 = $3.00