Andersen Corporation Andersen Corporation has the following information for the current month:

Units started 95,000 units

Beginning Work in Process: (30% complete) 15,000 units

Normal spoilage (discrete) 3,000 units

Abnormal spoilage 4,000 units

Ending Work in Process: (75% complete) 15,000 units

Transferred out 88,000 units

Beginning Work in Process Costs:

Material $18,000

Conversion 14,000

All materials are added at the start of the production process.Andersen Corporation inspects goods at 75 percent completion as to conversion. Refer to Andersen Corporation.Assume that the costs per EUP for material and conversion are $2.00 and $2.25,respectively.What is the amount of the period cost for July using FIFO?

Question

Andersen Corporation Andersen Corporation has the following information for the current month:

Units started	95,000 units
Beginning Work in Process: (30% complete)	15,000 units
Normal spoilage (discrete)	3,000 units
Abnormal spoilage	4,000 units
Ending Work in Process: (75% complete)	15,000 units
Transferred out	88,000 units
Beginning Work in Process Costs:
	Material $18,000
	Conversion 14,000

All materials are added at the start of the production process.Andersen Corporation inspects goods at 75 percent completion as to conversion. Refer to Andersen Corporation.Assume that the costs per EUP for material and conversion are $2.00 and $2.25,respectively.What is the amount of the period cost for July using FIFO?

Quizplus · Accepted Answer

To determine the period cost for July using FIFO, we need to determine the equivalent units of production (EUP) for both material and conversion costs separately.

For materials: 
Units started = 95,000 
Beginning WIP = 15,000 (30% complete) 
Ending WIP = 15,000 (75% complete) 
Transferred out = 88,000 
Total units to account for = 95,000 + 15,000 = 110,000

Equivalent units of production = Units completed and transferred out + Ending WIP EUP 
= 88,000 + (15,000 x 75%) = 88,000 + 11,250 = 99,250

Cost per EUP for material = $2.00

Total material cost = Cost per EUP x EUP 
= $2.00 x 99,250 = $198,500

For conversion costs: 
Units started = 95,000 
Beginning WIP = 15,000 (30% complete) 
Ending WIP = 15,000 (75% complete) 
Transferred out = 88,000 
Normal spoilage = 3,000 
Abnormal spoilage = 4,000 
Total units to account for = 95,000 + 15,000 - 3,000 - 4,000 = 103,000

Equivalent units of production = Units completed and transferred out + Ending WIP EUP 
= 88,000 + (15,000 x 75%) = 88,000 + 11,250 = 99,250

Cost per EUP for conversion = $2.25

Total conversion cost = Cost per EUP x EUP 
= $2.25 x 99,250 = $223,312.50

Total period cost using FIFO = Material cost + Conversion cost 
= $198,500 + $223,312.50 = $421,812.50

Therefore, the amount of the period cost for July using FIFO is $421,812.50, which is closest to option C, $14,750.

Andersen Corporation Andersen Corporation Has the Following Information for the Current Month