PROCESS COSTING
FIFO Method
KATHERINE2894
, Question:
Jones Company manufactures a single product and uses process costing (FIFO method). The
company’s product goes through two processing departments, Etching and Wiring. The
following activity was recorded in the Etching Department during July:
Production data: $
Units in process, July 1 (materials 60% complete; conversion 30% complete) 50,000
Units started into production 500,000
Units in process, July 31
Materials 80% complete; conversion 40% complete 60,000
Cost data: Work in process inventory, July 1:
Materials cost 17,000
Conversion cost 30,000
Cost added during July:
Materials cost 457,200
Conversion cost 349,300
Materials are added at several stages during the etching process. The company uses the FIFO
method.
Required:
1. Compute the equivalent units of production.
2. Compute the costs per equivalent unit for July.
3. Determine the cost of ending work in process inventory and of the units transferred to the
Wiring Department.
4. Prepare a cost reconciliation between the costs determined in (3) above and the cost of
beginning inventory and costs added during the period.
5. What criticism can be made of the unit costs that you have computed if they are used to
evaluate how well costs have been controlled?
Solution:
1. Compute the equivalent units of production.
Equivalent Unit of Production:
FIFO Method
KATHERINE2894
, Question:
Jones Company manufactures a single product and uses process costing (FIFO method). The
company’s product goes through two processing departments, Etching and Wiring. The
following activity was recorded in the Etching Department during July:
Production data: $
Units in process, July 1 (materials 60% complete; conversion 30% complete) 50,000
Units started into production 500,000
Units in process, July 31
Materials 80% complete; conversion 40% complete 60,000
Cost data: Work in process inventory, July 1:
Materials cost 17,000
Conversion cost 30,000
Cost added during July:
Materials cost 457,200
Conversion cost 349,300
Materials are added at several stages during the etching process. The company uses the FIFO
method.
Required:
1. Compute the equivalent units of production.
2. Compute the costs per equivalent unit for July.
3. Determine the cost of ending work in process inventory and of the units transferred to the
Wiring Department.
4. Prepare a cost reconciliation between the costs determined in (3) above and the cost of
beginning inventory and costs added during the period.
5. What criticism can be made of the unit costs that you have computed if they are used to
evaluate how well costs have been controlled?
Solution:
1. Compute the equivalent units of production.
Equivalent Unit of Production:
