Frosty Corp. produces gluten-free vanilla cake icing that it sells in small containers. Their accountant is performing some process costing calculations and has gathered the following information for the current month of October:
The accountant must decide whether they will use the FIFO or Weighted-Average method for their costing. In order to facilitate this process, they have collected data from both perspectives. What is the cost per equivalent unit for icing using the FIFO method?

Question

Frosty Corp. produces gluten-free vanilla cake icing that it sells in small containers. Their accountant is performing some process costing calculations and has gathered the following information for the current month of October:
 The accountant must decide whether they will use the FIFO or Weighted-Average method for their costing. In order to facilitate this process, they have collected data from both perspectives. What is the cost per equivalent unit for icing using the FIFO method?

Quizplus · Accepted Answer

This question requires several steps before being able to calculate the cost per equivalent unit. First, calculate what costs are included using the FIFO method, so that will ignore any beginning WIP Inventory costs. So, use the Icing cost added during the period of $4,473. Now, divide $4,473 by Equivalent Units (FIFO): $4,473/6,890 = $0.65 per unit.