Figure 6-11 Champ Inc.manufactures a product that passes through two processes: mixing and molding.All manufacturing costs are added uniformly in the Mixing Department.Information for the Mixing Department for October follows:
During October, 26,750 units were completed and transferred to the Molding Department.The following costs were incurred by the Mixing Department during October:

-Refer to Figure 6-11.There were 3,750 units that were 80 percent complete remaining in Mixing at October 31.Total cost per equivalent unit of production using the FIFO method is

Question

Figure 6-11 Champ Inc.manufactures a product that passes through two processes: mixing and molding.All manufacturing costs are added uniformly in the Mixing Department.Information for the Mixing Department for October follows:
 During October, 26,750 units were completed and transferred to the Molding Department.The following costs were incurred by the Mixing Department during October:
 
-Refer to Figure 6-11.There were 3,750 units that were 80 percent complete remaining in Mixing at October 31.Total cost per equivalent unit of production using the FIFO method is

Quizplus · Accepted Answer

Total cost incurred = $166,520

Equivalent Units of Production:
Completed and Transferred Out = 26,750 units
WIP Inventory at 80% = 3,750 * 80% = 3,000 units

Total Equivalent Units of Production = 26,750 + 3,000 = 29,750 units

Cost per Equivalent Unit of Production:
= Total Cost Incurred / Total Equivalent Units of Production
= $166,520 / 29,750 units
= $5.59 per unit

Cost per Equivalent Unit of Production using FIFO:
Direct Materials = $3.15
Conversion Costs = $2.44 + $2.00 = $4.44

Total Cost per Equivalent Unit of Production using FIFO:
= Direct Materials per Equivalent Unit of Production + Conversion Costs per Equivalent Unit of Production
= $3.15 + $4.44
= $7.59

Total Cost per Equivalent Unit of Production for the WIP Inventory at October 31:
Direct Materials = $3.15
Conversion Costs = $1.88 + $1.56 = $3.44

Total Cost per Equivalent Unit of Production for WIP Inventory at 80%:
= Direct Materials per Equivalent Unit of Production + Conversion Costs per Equivalent Unit of Production
= $3.15 + $3.44
= $6.59

Total Cost per Equivalent Unit of Production for Completed and Transferred Out units:
= Total Cost per Equivalent Unit using FIFO
= $7.59

Total Cost per Equivalent Unit of Production including WIP Inventory:
= (Cost per EU for Completed units * Completed units + Cost per EU for WIP units * WIP units)
/ Equivalent Units of Production
= ($7.59 * 26,750 + $6.59 * 3,000) / 29,750
= $198,007.50 / 29,750
= $6.65 per unit

Therefore, Total cost per equivalent unit of production using the FIFO method is $13.20 ($6.65 + $5.59)