The Matsui Lubricants plant uses the FIFO method to account for its work-in-proc

Question

The Matsui Lubricants plant uses the FIFO method to account for its work-in-process inventories. The accounting records show the following information for a particular day:

Beginning WIP inventory

Direct materials $ 1,988

Conversion costs 512

Current period costs

Direct materials 22,390

Conversion costs 13,832

Quantity information is obtained from the manufacturing records and includes the following:

Beginning inventory 580 units (70% complete as to materials, 50% complete as to conversion)

Current period units started 3,700 units

Ending inventory 1,300 units (40% complete as to materials, 20% complete as to conversion)

Required: Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. (Round your answers to 2 decimal places.)

Explanation / Answer

Units transfered = 580+3700 - 1300 = 2980 units

**Beginning WIP :Material 70% complete ,it means only 30 % material applied during the current period .

Material Conversion cost Beginning WIP 174    [580*.30] 290      [580 *.50] Units started and transfered in current period [2980 -580 = 2400 ] 2400 2400 Ending WIP     520   [1300*.40] 260    [1300*.20] Equivalent units    [B] 3094 2950 cost       [A] 22390 13832 cost per equivalent unit [A/B] 22390/3094 = $7.24 4.69

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