First-In, First-Out Method; Equivalent Units Aztec Inc. produces soft drinks. Mi
ID: 2403069 • Letter: F
Question
First-In, First-Out Method; Equivalent Units
Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:
Required:
1. Calculate the equivalent units for July.
equivalent units
2. Calculate the unit cost. Round your answer to the nearest cent.
$per unit
3. Assign costs to units transferred out and EWIP using the FIFO method. Note: Do not round interim computations.
Production: Units in process, July 1, 80% complete 40,000 gallons Units completed and transferred out 260,000 gallons Units in process, July 31, 75% complete 16,000 gallons Costs: Work in process, July 1 $ 64,000 Costs added during July 520,000Explanation / Answer
Opening WIP (80% complete) = 40000 gallons
Total units completed and transferred out = 260000 units
Out of this 260000 gallons, 40000 was the opening WIP that got completed and 220000 gallons was material introduced and completed in July.
Closing WIP (75% complete) = 16000 gallons
1. Equivalent units for July -
Opening WIP = 40000 * 20% = 8000 gallons
Units introduced and completed = 220000 * 100% = 220000 gallons
Closing WIP = 16000 * 75% = 12000 gallons
TOTAL = 240000 gallons
2. Unit cost = Costs added during July / Equivalent units for July
Unit cost = 520000 / 240000
Unit cost = $ 2.17
3. Cost of units transfered out = Value of 40000 units + Value of 220000 units
= [ 64000 + ( 2.17 * 40000 * 20% ) ] + ( 220000 * 2.17 )
= [ 64000 + 17360 ] + 477400
= $ 558760
Therefore, the cost of units transfered out is $ 558760
Cost of ending WIP = 16000 * 75% * 2.17
Cost of ending WIP = $ 26040
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.