The following are the details of Star Beer Co. for the month of July:
The cost per equivalent unit for Direct Materials (DM) is $5.00. The total equivalent units of DM are 28,400. The total costs to account for DM during the period are $148,000.
Find out the cost of DM in beginning Work-in-Progress (WIP) Inventory assuming company follows the First-In, First-Out (FIFO) method for inventories.

Question

Quizplus · Accepted Answer

As the company is following FIFO,
Direct Materials costs added to WIP Inventory during July = Cost per equivalent unit of Direct Materials × Total equivalent units of Direct Materials
= $5.00 × 28,400
= $142,000
Cost of Direct Materials in beginning WIP Inventory = Total Costs to account for DM during July - Direct Material costs added to WIP Inventory during July
= $148,000 - $142,000
= $6,000

The Following Are the Details of Star Beer Co