Question

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040.

Direct materials are added at the beginning of the process.

Additionally:
On May 1:Beginning inventories = 250 units, 40% complete
Direct materials costs = $1,250
Conversion costs = $1,356
Transferred-in costs = $2,560

During May:Direct materials costs incurred = $6,000
Conversion costs incurred = $17,013

On May 31: Ending Inventories = 350 units, 20% complete

Using the FIFO method what is the cost per equivalent unit for transferred-in units & the cost of the ending work in process?

Answer 1

Solution:

Computation of Equivalent Units of Production (FIFO method)
	Whole Units	Equivalent units Direct Materials	Equivalent units Conversion
Beginning Inventory (0% Material, 60% conversion)	250	0	150
Started and completed during current period (1200-250)	950	950	950
Transferred To finished Goods	1200	950	1100
Ending Inventory (100% Material, 20% Conversion)	350	350	70
Total equivalent units	1550	1300	1170

Computation of Cost per Equivalent Units
	Total	Direct Materials	Conversion
Current period cost	$23,013	$6,000	$17,013
/Equivalent Units		1300	1170
Cost per Equivalent unit		$4.62	$14.54