To determine Compute the cost of goods transferred out and the ending inventory using the FIFO method. Explanation First in and first out (FIFO) method: Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first. Compute the materials equivalent units and conversion costs equivalent units: Particulars Physical units Materials equivalent units Conversion costs equivalent units Beginning work-in-process inventory 600 Units started this period 4,000 Total units 4,600 Completed and transferred out 3,400 3,400 3,400 Beginning work-in-process inventory Materials 240 (1) Conversion costs 282 (2) Started and completed currently 2,800 2,800 Units in ending inventory 1,200 Materials 480 (3) Conversion costs 240 (4) Total units 4,600 3,520 3,322 Table: (1) Compute the cost per equivalent direct materials and conversion costs: Particulars Total Direct materials Conversion costs Costs in beginning work-in-process inventory $ 1,248 $ 976 $ 272 Current period costs $ 18,084 $ 11,440 $ 6,644 Total costs $ 19,332 $ 12,416 $ 6,916 Cost per equivalent unit Materials $ 3.25 (5) Conversion costs $ 2.00 (6) Table: (2) Compute the transferred out costs and cost of ending inventory: Particulars Direct materials Conversion Costs Total Costs from beginning work-in-process inventory $ 1,248 $ 976 $ 272 Beginning work-in-process inventory $ 1,344 Materials $ 780 (7) Conversion costs $ 564 (8) Current costs of units started and completed $ 14,700 Materials $ 9,100 (9) Conversion costs $ 5,600 (10) Transferred out $ 17,292 $ 10,856 $ 6,436 Cost of ending work-in-process inventory $ 2,040 Materials $ 1,560 (11) Conversion costs $ 480 (12) Total costs $ 19,332 $ 10,856 $ 6,436 Table: (3) Working note 1: Compute the beginning work-in-process inventory of materials equivalent units: Materials beginning inventory = (1 − Completion rate) × Beginning inventory = (1 − 60%) × 600 = 40% × 600 = 240 Working note 2: Compute the beginning work-in-process inventory of conversion costs equivalent units: Conversion costs beginning inventory = (1 − Completion rate) × Beginning inventory = (1 − 53 %) × 600 = 47% × 600 = 282 Working note 3: Compute the value of materials equivalent units: Materials = Completion rate × Number of units = 4 0% × 1,200 = 480 Working note 4: Compute the value of conversion costs equivalent units: Conversion costs = Completion rate × Number of units = 2 0% × 1,200 = 240 Working note 5: Compute the cost per unit of materials equivalent units: Cost per unit = Current period costs Total units = $11,440 3,520 = $3

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ISBN: 9781260852349

Author: LANEN

Publisher: MCG

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Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

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Chapter 8, Problem 36E

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Compute the cost of goods transferred out and the ending inventory using the FIFO method.

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Chapter 8, Problem 35E

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