Cost Information and FIFO Gunnison Company had the following equivalent units sc

Question

Cost Information and FIFO

Gunnison Company had the following equivalent units schedule and cost information for its Sewing Department for the month of December:

Required:

1. Calculate the unit cost for December, using the FIFO method.
$  per equivalent unit

2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for.

3. What if you were asked for the unit cost from the month of November?

Calculate November's unit cost.
$  per equivalent unit

Direct Materials         Conversion Costs   Units started and completed 50,000 50,000   Add: Units in beginning work in process ×          Percentage complete:          5,000 × 0% direct materials —          5,000 × 50% conversion Costs 2,500   Add: Units in ending work in process ×          Percentage complete:          14,000 × 100% direct materials 14,000 —          14,000 × 35% conversion Costs — 4,900   Equivalent units of output 64,000 57,400   Costs:          Work in process, December 1:          Direct Material $45,000          Conversion Costs 15,000          Total Work in process $60,000         Current costs:          Direct Material $640,000          Conversion Costs 114,800         Total current costs $754,800

Explanation / Answer

Answer 1 Calculation of Equivalent units using FIFO method Physical Units % complete with respect to Direct Material cost Equivalent units for Direct Material cost % complete with respect to Conversion cost Equivalent units for Conversion cost Beginning WIP 5000 0% 0 50% 2500 Units started and completed 50000 100% 50000 100% 50000 Ending WIP 14000 100% 14000 35% 4900 Equivalent Units 64000 57400 Calculation of cost per equivalent unit using FIFO method Direct Material Conversion Current cost $640,000.00 $114,800.00 / Equivalent Units 64000 57400 Cost per equivalent unit $10.00 $2.00 Answer 2 Cost of goods transferred out Direct Material Conversion Total Beginning WIP $45,000.00 $15,000.00 $60,000.00 Cost incurred to complete Beginning WIP $5,000.00 $5,000.00 Cost of units started and completed' $500,000.00 $100,000.00 $600,000.00 Cost of goods tranferred out $665,000.00 Cost of ending WIP Direct Material Conversion Total Cost of ending WIP $140,000.00 $9,800.00 $149,800.00 Cost fo ending WIP $149,800.00 Total $814,800.00 Cost to account for BWIP $60,000.00 Current (December) $754,800.00 Total $814,800.00 Answer 3 Calculation of unit cost for the month of November Direct Material Conversion Cost of BWIP $45,000.00 $15,000.00 / Equivalent units of BWIP 5000 2500 Unit cost for the month of November $9.00 $6.00

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