Krollon Company uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:

Question

Krollon Company uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:
 
According to the company’s costing system, the cost of beginning inventory was $7,886, of which $4,897 was for materials and the remainder was for conversion cost. The costs added during the month amounted to $181,652. The costs per equivalent unit for the month were:
 
Required:
1.	Compute the total cost per equivalent unit for the month.
2.	Compute the equivalent units of material and of conversion costs in the ending inventory.
3.	Compute the equivalent units of material and of conversion costs that were required to complete the beginning inventory
4.	 Determine the number of units started and completed during the month.
5.	 Determine the costs of ending inventory and units transferred out.

Mousa · Accepted Answer

1. Compute the total cost per equivalent unit for the month. 18.20 + 23.25 = 41.45

2. Compute the equivalent units of material and of conversion costs in the ending inventory.

Equivalent units in ending inventory = units in ending inventory x % completed

Material = 300 * 80% = 240
Conversion = 300 * 40% = 120

Equivalent units in beginning inventory = units in ending inventory x % completed
Material = 400 * 70% = 280
Conversion = 400 * 30% = 120

2. Determine the number of units started and completed during the month.

units started into production – units in ending WIP
4400 – 400 = 4000
3. Determine the costs of ending inventory and units transferred out.

Material Conversion
Ending WIP inventory:
Equivalent units of production 240 120
Cost per equivalent unit 18.2 23.25
Cost of ending WIP inventory 4,368 390

Units transferred out:
Cost from beginning WIP inventory 7,886 4,897 12,783
Cost to complete the beginning WIP inventory
Equivalent units of production 280 120
Cost per equivalent unit 18.2 23.25
Cost to complete the units beginning WIP inventory 5,096 2,790 7,886

Cost of units started & completed during the period
Units started & completed this period 4,000 4,000
Cost per equivalent unit 18.2 23.25
Cost of units started & completed during the period 72,800 93,000 165,800

Total cost of units transferred out $186,469