Devine Desserts specializes in the production of sweet plant-based bakery items. Their top seller for the past few years has been their cherry cheesecake made with a flourless crust and organic fruit toppings. Devine is currently considered a boutique operation, but they are looking to increase production and to expand their offerings and customer base. In an effort to refine their spending efforts and advertising costs, they will be compiling some costing data on their cherry cheesecake. The following costing information applies to the current year:
The following production summary has also been compiled for this year's operations:
If management decides to use the First-In, First-Out (FIFO) method, then how much cost will be assigned to the units completed and transferred out of the manufacturing process? (Do not round intermediate calculations.)

Question

Devine Desserts specializes in the production of sweet plant-based bakery items. Their top seller for the past few years has been their cherry cheesecake made with a flourless crust and organic fruit toppings. Devine is currently considered a boutique operation, but they are looking to increase production and to expand their offerings and customer base. In an effort to refine their spending efforts and advertising costs, they will be compiling some costing data on their cherry cheesecake. The following costing information applies to the current year:
 The following production summary has also been compiled for this year's operations:
 If management decides to use the First-In, First-Out (FIFO) method, then how much cost will be assigned to the units completed and transferred out of the manufacturing process? (Do not round intermediate calculations.)

Quizplus · Accepted Answer

This question requires the ability to walk through all five of the process costing steps. First, determine how many units to account for while realizing that both beginning and ending inventories have to be derived from the information given. The ending inventory of the previous year becomes the beginning inventory of the current year. The beginning balance of the following year was the ending balance of the current year. The first step is to verify physical units in the period and their degree of completion. Units in beginning WIP inventory plus units started this period, 755 + 64,789 = 65,544 total units to account for. Now, determine the units completed this period with the help of total units accounted for (calculated above) and the given ending inventory balance, 65,544 - 1,130 = 64,414 units. Next, calculate the units that were both started and completed as: New units started - Ending WIP inventory, 64,789 - 1,130 = 63,659 units.
In step two, account for equivalent units. Under FIFO, there will be a separate assessment of beginning inventory. Crust: (755 × 0%) + (63,659 × 100%) + (1,130 × 100%) = 64,789 equivalent units. Cherry Toppings: (755 × 0%) + (63,659 × 100%) + (1,130 × 96%) = 64,743.80 equivalent units. Conversion Costs: (755 × 68%) + (63,659 × 100%) + (1,130 × 92%) = 65,212.00 equivalent units. In step three, account for costs: Crust, $58,799; Cherry Toppings, $27,940; and Conversion Costs, $72,340. For step four, calculate the cost per equivalent unit: Crust, $58,799/64,789 = $0.9075; Cherry Toppings, $27,940/64,743.80 = $0.4315; and Conversion Costs, $72,340/65,212 = $1.1093. In step five, allocate costs based upon the equivalent units calculated. Crust = $1,950 + (63,659 × $0.9075) = $59,723.47. Cherry Toppings = $1,560 + (63,659 × $0.4315) = $29,031.86. Conversion Costs = $2,678 + (513.4 × $1.1093) + (63,659 × $1.1093) = $73,864.77. The total cost of units completed and transferred out of the manufacturing process = $59,723.47 + $29,031.86 + $73,864.77 = $162,620.10.

Devine Desserts Specializes in the Production of Sweet Plant-Based Bakery