Question

The Matsui Lubricants plant uses the FIFO method to account for its work-in-process inventories. The accounting records show the following information for a particular day:

    

Beginning WIP inventory
Direct materials	$	1,890
Conversion costs		500
Current period costs
Direct materials		21,930
Conversion costs		13,810

  

Quantity information is obtained from the manufacturing records and includes the following:

  

Beginning inventory	550	units	(70% complete as to materials, 60% complete as to conversion)
Current period units started	3,500	units
Ending inventory	1,200	units	(50% complete as to materials, 10% complete as to conversion)

  

Required:

Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. (Round your answers to 2 decimal places.)

Answer 1

Cost per equivalent unit:
Direct materials	7.15
Conversion costs	5.23
Workings:
	Direct materials	Conversion costs
To complete Beginning inventory:
550*(1-70%)	165
550*(1-60%)		220
Units started and completed	2300	2300	=3500-1200
Ending inventory:
1200*50%	600
1200*10%		120
Equivalent units	3065	2640
	Direct materials	Conversion costs
Current period costs	21930	13810
/ Equivalent units	3065	2640
Cost per equivalent unit	7.15	5.23