A department using the FIFO method for process costing begins the month with 10,000 units which were 70% complete at the end of the previous month. They started and completed 50,000 units and their ending work in process inventory consisted of 5,000 units which were 10% complete. The costs incurred were $200,000. The cost per equivalent unit of production, using the FIFO method is $. Round your answer to two decimal places.

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Business

Riley Sellers

2 October, 19:31

A department using the FIFO method for process costing begins the month with 10,000 units which were 70% complete at the end of the previous month. They started and completed 50,000 units and their ending work in process inventory consisted of 5,000 units which were 10% complete. The costs incurred were $200,000. The cost per equivalent unit of production, using the FIFO method is $. Round your answer to two decimal places.

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Faith Kim · Answer 1

the cost per equivalent unit of production is $4.60

Explanation:

The concept of Equivalent unit of Production measures the output of a process in terms of percentage completion of inputs added into the units of outputs.

With FIFO method, we are only interested in the costs incurred in the year of production because, the costs of Opening Work in Process will in their entirety go towards the completed units

The first step is to determine the Number of Equivalent units as follows:

To finish Opening Work In Process (10,000 * 30%) = 3,000

Started and Completed (50,000 - 10,000) * 100% = 40,000

Closing Work In process (5,000 * 10%) = 500

Total Equivalent Units = 43,500

The Next Step is to Calculate Cost per Equivalent Unit.

Cost per Equivalent Unit = Total Costs / Total Equivalent Units

= $200,000 / 43,500

= $4.60

Therefore, the cost per equivalent unit of production is $4.60