Layla Company began making mascara in November 2014 using a single-step process. Layla incurred $42,000 for materials and $48,640 for conversion during the month. There were 21,000 cases of mascara started in November and 3,000 cases unfinished (40 percent complete) at the end of the period. All materials were added at the beginning of the production process. What is the unit cost for materials for Layla using the FIFO method?

Question

Quizplus · Accepted Answer

To calculate the unit cost for materials using the FIFO method, we need to determine how many units were completed and how many units were still in process at the end of the period.

Completed: 
21,000 cases - 3,000 cases (40% complete) = 18,600 completed cases

Materials cost: 
$42,000 / 18,600 cases = $2.26 per case

However, all materials were added at the beginning of the production process, so we need to adjust for the 3,000 cases that were still in process at the end of the period.

Materials cost for incomplete cases: 
$2.26 per case x 3,000 cases x 60% = $4,068

Total materials cost: 
$42,000 + $4,068 = $46,068

Unit cost for materials: 
$46,068 / 21,000 cases = $2.19 per case, rounded to $2.00.

Layla Company Began Making Mascara in November 2014 Using a Single-Step