Question

Cost Information and FIFO

Gunnison Company had the following equivalent units schedule and cost information for its Sewing Department for the month of December:

	Direct Materials		Conversion Costs
Units started and completed	49,000		49,000
Add: Units in beginning work in process ×
Percentage complete:
6,000 × 0% direct materials	—
6,000 × 50% conversion Costs			3,000
Add: Units in ending work in process ×
Percentage complete:
10,000 × 100% direct materials	10,000		—
10,000 × 35% conversion Costs	—		3,500
Equivalent units of output	59,000		55,500
Costs:
Work in process, December 1:
Direct Material			$78,000
Conversion Costs			9,000
Total work in process			$87,000
Current costs:
Direct Material			$826,000
Conversion Costs			111,000
Total current costs			$937,000

Required:

1. Calculate the unit cost for December, using the FIFO method.
$ per equivalent unit

2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for.

Cost of goods transferred out	$
Cost of EWIP	$

Cost to account for:
BWIP	$
Current (December)
Total	$

3. What if you were asked for the unit cost from the month of November? Calculate November's unit cost.
$ per equivalent unit

Answer 1

(1) The unit cost for December, using the FIFO method.
$ per equivalent unit

Particular	Direct material	Conversion Costs	Total
Current cost added this period	$826,000	$111,000	$937,000
Divided by equivalent units	59,000	55,500
Cost per equivalent units	$14	$2	$16

Cost per unit for December , using the FIFO method is $16

(2)  Calculation of the cost of goods transferred out,and the cost of EWIP, and reconcile the costs assigned with the costs to account for.

Cost assigned	Direct material	Conversion Costs	Total
Cost assigned to units transferred out
Cost of beginning WIP inventory	$78,000	$9,000	$87000
Cost to complete Beginning WIP*		$6000	$6000
Total	78000	15000	93000
Cost Assigned to Units   Started and Completed*	$686000	$98000	$784000
Total Cost of Goods   Transferred Out (A)	890000	113000
Cost Assigned to Ending WIP   (B)*	14000	7000	21000
Total Costs Accounted For   (A+B)	904,000	120,000	1024000
Costs to Account For
Beginning WIP	78000	9000	87000
Current Costs	826,000	111,000	937,000
Total Costs to Account For	904,000	120,000	1024000
Difference	$-	$-	$-

Note(*): Equivalent Units of Production (EUP) x Cost per EUP

Cost of beginning WIP inventory	$87000
Cost to Complete Beginning   WIP	6000
Total manufacturing cost of beginning inventory	93000
Divided By Units Produced	6000
Unit Cost of Beginning   Inventory	15.5