Loose Leaf for Fundamentals of Accounting Principles and Connect Access Card
Loose Leaf for Fundamentals of Accounting Principles and Connect Access Card
22nd Edition
ISBN: 9781259542169
Author: John J Wild
Publisher: McGraw-Hill Education
Question
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Chapter 20, Problem 21QS
To determine

Concept Introduction:

Equivalent Units of Production:

The equivalent units of production can be defined as the units which are partially completed to be counted as fully completed units based on their percentage of work done on them.

For example, the units in ending inventory are 1,000 units and 60 % completed. Thus, the equivalent units for ending inventory will be = 1,000 units X 60 % = 600 units.

First-in, first-out (FIFO):

In FIFO method of inventory, the cost of goods sold and ending inventory are valued at the older prices. The cost of goods sold are valued at the older prices and the inventory which remains unsold are with the newest prices. This method says that, the inventory first purchased is first sold the ending inventory consists of the latest purchases.

Cost per equivalent unit:

Cost per equivalent unit can be defined as the costs that are incurred during the process to the equivalent units of production. In FIFO method, only the costs that are added during the process are assigned to the equivalent units of production for materials and conversion.

Cost per equivalent unit can be calculated as under –

Cost per equivalent units=Total cost added during the processEquivalent units of production

Requirement 1

To compute:

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

Expert Solution
Check Mark

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.

Units added and completed 100 % = Units transferred out  Beginning inventory units

Given,

• Units transferred out = 17,000 units ( 2,000 units + 18,000 units – 3,000 units)

• Beginning inventory units = 2,000 units

Units added and completed 100 % = Units transferred out  Beginning inventory unitsUnits added and completed 100 % = 17,000 units  2,000 unitsUnits added and completed 100 % = 15,000 units

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 %

 Equivalent units for Beginning inventory= Units in beginning inventory X(1 percent of completion)

Units to be counted from beginning inventory for materials –

Equivalent units= 2,000 units X (1  70%)Equivalent units= 2,000 units X 30 %Equivalent units= 600 units

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 %

Equivalent units for ending inventory = Units in beginning inventory X Percent of completion

Equivalent units for ending inventory for materials –

Units to be counted as completed = 3,000 units X 80%Units to be counted as completed = 2,400 units

Total equivalent units for production for materials will be calculated as under –

Total equivalent units for production = Beginning equivalent units + Completed and transferred                                                               + Ending equivalent units

Given,

For materials –

• Beginning equivalent units = 600 units

• Completed and transferred = 15,000 units

• Ending equivalent units = 2,400 units

Total equivalent units for production = 600 units + 15,000 units + 2,400 units Total equivalent units for production = 18,000 units

Conclusion

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

To determine

Requirement 2

To compute:

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

Expert Solution
Check Mark

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

Cost per equivalent units=Total cost added during the processEquivalent units of productionCost per equivalent units=$27,90018,000 units Cost per equivalent units= $ 1.55 per unit

Conclusion

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

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Chapter 20 Solutions

Loose Leaf for Fundamentals of Accounting Principles and Connect Access Card

Ch. 20 - Prob. 11DQCh. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Prob. 14DQCh. 20 - Prob. 15DQCh. 20 - Prob. 16DQCh. 20 - Prob. 1QSCh. 20 - Prob. 2QSCh. 20 - Prob. 3QSCh. 20 - Prob. 4QSCh. 20 - Prob. 5QSCh. 20 - Prob. 6QSCh. 20 - Prob. 7QSCh. 20 - Prob. 8QSCh. 20 - Prob. 9QSCh. 20 - Prob. 10QSCh. 20 - Prob. 11QSCh. 20 - Prob. 12QSCh. 20 - Prob. 13QSCh. 20 - Prob. 14QSCh. 20 - Prob. 15QSCh. 20 - Prob. 16QSCh. 20 - Prob. 17QSCh. 20 - Prob. 18QSCh. 20 - Prob. 19QSCh. 20 - Prob. 20QSCh. 20 - Prob. 21QSCh. 20 - Prob. 22QSCh. 20 - Prob. 23QSCh. 20 - Recording costs of labor P2 Prepare journal...Ch. 20 - Prob. 25QSCh. 20 - Prob. 26QSCh. 20 - Prob. 27QSCh. 20 - Prob. 1ECh. 20 - Prob. 2ECh. 20 - Prob. 3ECh. 20 - Prob. 4ECh. 20 - Prob. 5ECh. 20 - Prob. 6ECh. 20 - Prob. 7ECh. 20 - Prob. 8ECh. 20 - Prob. 9ECh. 20 - Prob. 10ECh. 20 - Prob. 11ECh. 20 - Prob. 12ECh. 20 - Prob. 13ECh. 20 - Prob. 14ECh. 20 - Prob. 15ECh. 20 - Prob. 16ECh. 20 - Prob. 17ECh. 20 - Prob. 18ECh. 20 - Exercise 20-19 Production cost flows P1 P2 P3 P4...Ch. 20 - Exercise 20-20 Weighted average: Process cost...Ch. 20 - Exercise 20-21 Recording costs of...Ch. 20 - Prob. 22ECh. 20 - Prob. 23ECh. 20 - Exercise 20-24 Recording cost of completed...Ch. 20 - Prob. 25ECh. 20 - Prob. 26ECh. 20 - Prob. 27ECh. 20 - Prob. 1APSACh. 20 - Prob. 2APSACh. 20 - Prob. 3APSACh. 20 - Prob. 4APSACh. 20 - Prob. 5APSACh. 20 - Prob. 6APSACh. 20 - Prob. 7APSACh. 20 - Prob. 1BPSBCh. 20 - Prob. 2BPSBCh. 20 - Prob. 3BPSBCh. 20 - Prob. 4BPSBCh. 20 - Prob. 5BPSBCh. 20 - Prob. 6BPSBCh. 20 - Prob. 7BPSBCh. 20 - Prob. 20SPCh. 20 - Prob. 20CPCh. 20 - Prob. 1GLPCh. 20 - Prob. 1BTNCh. 20 - Prob. 2BTNCh. 20 - Prob. 3BTNCh. 20 - Prob. 4BTNCh. 20 - Prob. 5BTNCh. 20 - Prob. 6BTNCh. 20 - Prob. 7BTNCh. 20 - Prob. 8BTNCh. 20 - Prob. 9BTN
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