An organization in which Mr. Smith is in charge of the manufacturing department follows the First-In, First-Out (FIFO) method of inventory valuation. The following are the estimates for the next processing department:
Units in Beginning Work-in-Progress (WIP) Inventory Completed: 3,000 units
Total Estimated Costs of Units Completed and Removed from WIP Inventory: $18,806
Per Unit Estimated Cost: $1.71
In order to make the actuals meet the estimates, what should be Mr. Smith's target, to the nearest thousand, for units started and completed in the process be?

Question

Quizplus · Accepted Answer

Under the FIFO method, Unit Cost = Total Cost of Units Completed and Removed from WIP Inventory/(Units in Beginning WIP Inventory Completed + Units Started and Completed)
$1.71 = $18,806/(3,000 units + X units)
$1.71 × (3,000 units + X units) = $18,806
$5,130 + $1.71X = $18,806
$1.71X = $18,806 - $5,130
$1.71X = $13,676
X = $13,676/$1.71
X = 7,997.66 units
X = 8,000 units

An Organization in Which Mr