Sticky Fingers Corp is a manufacturer of gluten-free cinnamon rolls that are packaged and sold in quantities of six rolls. Sticky has chosen to implement a process costing system to account for their production costs at the recommendation of the head cost accountant, Trevor. He examined their records for the most current year and compiled the following information:
Beginning Work-in-Progress (WIP) Inventory: 256 units that are 100% completed for Direct Materials (DM) and 68% completed for Conversion Costs (CC)
Units Started During the Period: 18,540
Units Completed by the End of the Period: 16,400
Ending WIP Inventory: X units that are 100% completed for Direct Materials and 60% completed for Conversion Costs
Their beginning inventory includes the following costs: Direct Materials, $343; and Conversion Costs, $652. During the most recent year, Sticky added the following costs: Direct Materials, $48,900; and Conversion Costs, $58,777. Using the First-In, First-Out (FIFO) method, how much total cost should be assigned to units completed this period? (Round units to nearest whole number and costs to two decimal places.)

Question

Quizplus · Accepted Answer

(Total cost calculated in steps 3 and 5 of process costing may vary due to rounding.) This question requires the use of all five of the process costing steps. Before the first step, determine how many units to account for which will also produces the unknown ending inventory units, X. Begin by calculating physical units in the period and their degree of completion. Units in beginning WIP inventory plus units started this period = 256 + 18,540 = 18,796 total units to account for. Now, determine the ending inventory by deducting the units completed from the total units to account for: 18,796 - 16,400 = 2,396 units. Next, calculate the units that were started and completed using the following formula: New units started - Units in ending WIP inventory = 18,540 - 2,396 = 16,144 units.
For step two, account for equivalent units. Under FIFO, there will be a separate assessment of beginning inventory. Direct Materials: (256 × 0%) + (16,144 × 100%) + (2,396 × 100%) = 18,540 equivalent units. Conversion Costs: (256 × 32%) + (16,144 × 100%) + (2,396 × 60%) = 82 + 16,144 + 1,438 = 17,664 equivalent units. In step three, account for costs added to WIP inventory this period: Direct Materials: $48,900, and Conversion Costs: $58,777. For step four, calculate the cost per equivalent unit: Direct Materials, $48,900/18,540 = $2.64; and Conversion Costs, $58,777/17,664 = $3.33. Finally, step five requires allocation of costs based on the equivalent units calculated. The end result should appear as follows:
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Sticky Fingers Corp Is a Manufacturer of Gluten-Free Cinnamon Rolls