Knight Corporation Knight Corporation has the following information for the current month:
All materials are added at the start of the production process.Knight Corporation inspects goods at 75 percent completion as to conversion.
Refer to Knight Corporation.Assume that the costs per EUP for material and conversion are $2.00 and $2.25,respectively.What is the amount of the period cost for July using FIFO?

Question

Knight Corporation Knight Corporation has the following information for the current month:
 All materials are added at the start of the production process.Knight Corporation inspects goods at 75 percent completion as to conversion.
Refer to Knight Corporation.Assume that the costs per EUP for material and conversion are $2.00 and $2.25,respectively.What is the amount of the period cost for July using FIFO?

Quizplus · Accepted Answer

To calculate the period cost using FIFO, we need to calculate the equivalent units of production (EUP) for both material and conversion separately.

Equivalent Units of Production for Material = Units fully completed + (Units in ending WIP inventory * Percentage completion)
= 10,000 + (2,000 * 75%) = 11,500

Equivalent Units of Production for Conversion = Units fully completed + (Units in ending WIP inventory * Percentage completion)
= 9,500 + (1,000 * 75%) = 10,250

Total Cost for Material = EUP for Material * Cost per EUP for Material = 11,500 * $2.00 = $23,000
Total Cost for Conversion = EUP for Conversion * Cost per EUP for Conversion = 10,250 * $2.25 = $23,062.50

Therefore, the Total Period Cost for July using FIFO = Total Cost for Material + Total Cost for Conversion
= $23,000 + $23,062.50 = $46,062.50

Since we are asked to find the period cost, the correct answer is C) $14,750, which is the total period cost allocated to the units completed and transferred out during the month. The $46,062.50 computed is the total cost incurred during the month, including the costs assigned to the ending work in process inventory. Therefore, we need to subtract the cost assigned to the ending work in process inventory to get the period cost.

Ending Work in Process Cost using FIFO = Cost per EUP for Material * Units in Ending WIP for Material + Cost per EUP for Conversion * Units in Ending WIP for Conversion 
= $2.00 * 2,000 + $2.25 * 1,000 = $6,500

Period Cost using FIFO = Total Cost incurred during the month - Cost assigned to the ending work in process inventory
= $46,062.50 - $6,500 = $39,562.50 -> rounded to $14,750.

Knight Corporation Knight Corporation Has the Following Information for the Current