Question

First-In, First-Out Method; Equivalent Units Aztec Inc. produces soft drinks. Mixing is the first department, and...

First-In, First-Out Method; Equivalent Units

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Production:
Units in process, July 1, 80% complete 40,000 gallons
Units completed and transferred out 260,000 gallons
Units in process, July 31, 75% complete 16,000 gallons
Costs:
Work in process, July 1 $ 64,000
Costs added during July 520,000

Required:

1. Calculate the equivalent units for July.
equivalent units

2. Calculate the unit cost. Round your answer to the nearest cent.
$per unit

3. Assign costs to units transferred out and EWIP using the FIFO method. Note: Do not round interim computations.

Cost of units transferred out $
Ending work in process $
Business   Accounting   
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Homework Answers

Answer #1

Opening WIP (80% complete) = 40000 gallons

Total units completed and transferred out = 260000 units

Out of this 260000 gallons, 40000 was the opening WIP that got completed and 220000 gallons was material introduced and completed in July.

Closing WIP (75% complete) = 16000 gallons

1. Equivalent units for July -

Opening WIP = 40000 * 20% = 8000 gallons

Units introduced and completed = 220000 * 100% = 220000 gallons

Closing WIP = 16000 * 75% = 12000 gallons

TOTAL = 240000 gallons

2. Unit cost = Costs added during July / Equivalent units for July

Unit cost = 520000 / 240000

Unit cost = $ 2.17

3. Cost of units transfered out = Value of 40000 units + Value of 220000 units

= [ 64000 + ( 2.17 * 40000 * 20% ) ] + ( 220000 * 2.17 )

= [ 64000 + 17360 ] + 477400

= $ 558760

Therefore, the cost of units transfered out is $ 558760

Cost of ending WIP = 16000 * 75% * 2.17

Cost of ending WIP = $ 26040

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