Chapter 20, Problem 21QS

Requirement 1:

To determine

To compute:

The roasting department's equivalent units of production for materials for the month using FIFO method.

Answer to Problem 21QS

Solution:

	Materials
Equivalent Units	18,000 units

Explanation of Solution

The equivalent units of production for Materials can be calculated as under −
First, units added and completed 100 % from the process will be calculated.
  $Unitsaddedandcompleted100\%=Unitstransferredout–Beginninginventoryunits$

Given,

• Units transferred out = 17,000 units ( 2,000 units + 18,000 units − 3,000 units)
• Beginning inventory units = 2,000 units

  $\begin{array}{l}Unitsaddedandcompleted100\%=Unitstransferredout–Beginninginventoryunits\hfill \\ Unitsaddedandcompleted100\%=\text{ 17},000units–2,000units\hfill \\ Unitsaddedandcompleted100\%=\text{ 15},000units\hfill \end{array}$

Out of total units transferred, 15,000 units were added and completed and transferred out during the process.
Equivalent units of production as FIFO method will be calculated as under −

Equivalent units of production -FIFO
	Direct Materials
Units to complete - Beginning Inventory
Direct Materials (2,000 X 30%)	600
Units completed and transferred out	15,000
Units completed - Ending Inventory
Direct Materials (3,000 X 80%)	2,400
Equivalent units of production	18,000

The above calculations can be explained as under −

For beginning inventory −

Given,

• Units in beginning inventory = 2,000 units
• For direct material completed percentage = 70 %

  $Equivalentunitsfor\text{ Beginni}nginventory=UnitsinbeginninginventoryX\left(1–percentofcompletion\right)$ Units to be counted from beginning inventory for materials −
  $\begin{array}{l}Equivalentunits=2,000unitsX\left(1–\text{ 7}0\%\right)\hfill \\ Equivalentunits=2,000unitsX\text{ 3}0\%\hfill \\ Equivalentunits=\text{ 6}00units\hfill \end{array}$

For units added, completed and transferred out −
15,000 units calculated as above
For ending inventory −

Given,

• Units in ending inventory = 3,000 units
• For direct material completed percentage = 80 %

  $\text{Equivalent units for ending inventory }=UnitsinbeginninginventoryX\text{ Percent of completion}$

Equivalent units for ending inventory for materials −
  $\begin{array}{l}Unitstobecountedascompleted=\text{ 3},000unitsX\text{ 80\%}\hfill \\ Unitstobecountedascompleted=2,400units\hfill \\ \hfill \end{array}$

Total equivalent units for production for materials will be calculated as under −
  $\begin{array}{l}Totalequivalentunitsforproduction=Beginningequivalentunits+Completedandtransferred\\ +Endingequivalentunits\end{array}$

Given,

For materials −

• Beginning equivalent units = 600 units
• Completed and transferred = 15,000 units
• Ending equivalent units = 2,400 units

  $\begin{array}{l}Totalequivalentunitsforproduction=\text{ 600 units + 15,000 units }+\text{ 2,400 units }\\ Totalequivalentunitsforproduction=18,000\text{ units}\end{array}$

Conclusion

Thus, the roasting department's equivalent units of production for materials for the month using FIFO method have been calculated.

Requirement 2:

To determine

To compute:

The roasting department's cost per equivalent unit of production for materials for the month using FIFO method.

Answer to Problem 21QS

Solution:

The roasting department's cost per equivalent unit of production for materials for the month using FIFO method = $ 1.55 per unit

Explanation of Solution

The cost per equivalent unit for materials is calculated as under −

Cost per Equivalent unit - FIFO
	Direct Materials
Costs incurred during the period	27,900
Equivalent units of production	18,000
Cost per Equivalent unit	1.55

Given,

For materials −

• Costs incurred during the period = $ 27,900
• Equivalent units of production = 18,000 units

  $\begin{array}{l}Costperequivalentunits=\frac{Totalcostaddedduringtheprocess}{Equivalentunitsofproduction}\\ Costperequivalentunits=\frac{\text{\$27,900}}{\text{18,000 }units}\\ Costperequivalentunits=\$1.55perunit\end{array}$

Conclusion

Thus, the roasting department's cost per equivalent unit of production for materials for the month using FIFO method has been calculated.