P6-8 Page 359 FIFO cost method; cost of production summary Daytona Beverages Inc
ID: 2590413 • Letter: P
Question
P6-8 Page 359
FIFO cost method; cost of production summary
Daytona Beverages Inc. uses the FIFO cost method and adds all materials, labor, and factory overhead evenly to production. A record of the factory operations for October follows:
Production Summary
Work in process, beginning of month, one-fourth completed: 5,000
Started in process: 13,000
Finished and transferred to stockroom: 11,000
Work in process, end of month, three-fourths completed: 7,000
Cost Summary
Work in process, beginning of month: $10,000
Materials: $45,000
Labor: $30,000
Factory overhead: $15,000
What is the equivalent unit of production for material, labor, and overhead?
15,000
16,525
11,000
18,000
Explanation / Answer
Answer = 15,000 units
Equivalent Units
It is mentioned that we will have to follow FIFO method, so first opening stock units will be completed then the units we started production with
So In completed units of 11,000 units, opening stock is 5000 units and remaining 6000 units is the units we started production in this year.
So 6000(11,000 - 5000) is the units we started and finished and the remaining 7000 is still in WIP
Opening WIP = 5000 units *3/4 = 3750 units
Started with= 6000(11,000 - 5000) * 100 = 6000 units
Closing = 7000 * 3/4 = 5250 units
Equivalent units = 3750 + 6000 + 5250
Equivalent units= 15,000 Units
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