Lee Company began making lipstick in October 2011 using a single-step process. Lee incurred £42,000 for materials and £48,640 for conversion during the month. There were 21,000 cases of lipstick started in October and 3,000 cases unfinished (40 per cent complete) at the end of the period. All materials were added at the beginning of the production process. What is the unit cost for materials for Lee using the FIFO method?
A)£4.53
B)£2.00
C)£2.03
D)none of these

Question

Quizplus · Accepted Answer

The unit cost for materials using the FIFO method is calculated by dividing the total materials cost by the number of units started and completed. Since all materials are added at the beginning, the cost is £42,000/21,000 = £2.00 per unit.

Lee Company Began Making Lipstick in October 2011 Using a Single-Step