Elmi Industries manufactures plastic toys. During October, Elmi\'s Fabrication D

Question

Elmi Industries manufactures plastic toys. During October, Elmi's Fabrication Department started work on 10,000 models. During the month, the Coa 11,000 models, and transferred them to the Distribution Department. ended the month with 1.500 models in ending inventory. There wer beginning inventory. Al direct materials costs company complet 2,500 models in roductio , while ending work in process wa The company are added at the beginning of on cycle and conversion costs are added uniformly throughout the p process. The FIFO method of process was 25%complete as to conversion costs 50% complete-as to conversion costs. process costing is being followed. Beginning work in Beginning inventory: Direct materials costs $19,200 Conversion costs $10,800 Manufacturing costs added during the accounting period Direct materials costs $70,000 Conversion costs $240,000 23) How many of the units that were started and completed during October? A) 13,500 9)8.500(1,630 madots lav o5OD) C) 8,500 D) 10,000 24) What were the equivalent units for conversion costs during October? A) 10,125 B) 11,125 C) 12,125 D) 9,000 25) What is the amount of direct materials cost assigned to ending work-in-proces inventory at the end of October? A) $22,727 B) $17,202 C) $10,500 D) $11,500 26) What is the cost assigned to ending inventory during October? A) $26,678 B) $31,536 C) $36,000 D) $38,000 Inv 050D 30, 06D

Explanation / Answer

Solution:

FIFO Method in Process Costing

Physical Units Count

In FIFO method, the unit of beginning inventory is completed first and then Units received during the period is completed.

Equivalent units of Material

In FIFO method,

- First we calculate the cost per equivalent units of material and conversion by using the cost incurred during the current period i.e. current period cost and divide by equivalent units of production.

- While calculating the equivalent cost per unit of production beginning WIP cost is ignored.

Cost Accounted for:

Cost of Beginning Units is the sum of following

(i) Current Period Cost (i.e. the cost of equivalent production units part of beginning inventory completed during the period and

(ii) the cost of beginning inventory

The part of beginning inventory completed during the period is calculated by multiplying the cost of equivalent units with the completed equivalent part of beginning units during the current period

Ending Inventory

The Ending Inventory is valued at current period cost i.e. the cost added during the current period/month.

Part 23 --- The correct option is C. $8,500

Primary working..

Units

% Materials

EUP - Material

% Conversion

EUP - Conversion

Partial Completed Beginning Work In Process

2500

0

0

75%

1875

Units Started and Completed during October

8500

100%

8500

100%

8500

Total Completed and transferred Units

11000

Ending Work In Process Units

1500

100%

1500

50%

750

Total

10000

11125

Part 24 --- Refer working above. The correct option is B. $11,125 Units

The equivalent units for conversion is 11,125 Units

Part 25 – Correct option is C) $10,500

Calculation of Cost per equivalent units

Direct Materials

Conversion

Cost incurred during the period

$70,000

$240,000

Equivalent Units of Production

10,000

11125

Cost per Equivalent Unit

$7.00

$21.57

Direct material cost assigned to ending work in process = Equivalent Units of Ending Inventory in Direct Materials 1,500 Units x Cost per Equ units for direct material $7

= $10,500

Part 26 – the correct option is A) $26,678

Cost assigned to ending inventory

Direct Materials (1500 Eq Units x $7)

$10,500

Conversion (750 Eq units x $21.57)

$16,178

Total cost assigned to Ending Inventory

$26,678

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Units

% Materials

EUP - Material

% Conversion

EUP - Conversion

Partial Completed Beginning Work In Process

2500

0

0

75%

1875

Units Started and Completed during October

8500

100%

8500

100%

8500

Total Completed and transferred Units

11000

Ending Work In Process Units

1500

100%

1500

50%

750

Total

10000

11125

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