Cost accounting (Job order vs Process Costing)

Question 1

What is the FIFO method? How to calc the number of equivalents produced using the FIFO method?

Answer 1

The FIFO method the equivalent units included only ending units in work in process finished units. While beginning units is excluded from the equivalent unit calculation.

To calc the number of equivalents produced using the FIFO method we first need to units completed for the quarter or year. In this problem the “units completed during the quarter” is 140,000, which is given in the problem.

Next step multiply the beginning work in process units by the Beginning work-in-process inventory”. So “beginning work in process” 10,000 units x 70% beginning work in process inventory 70% = 7,000. We also need to multiply the ending work in process” and multiply the ending work in process inventory 25% complete. So ending work in process is 20,000 x 25% Ending work in process inventory = 5000.

Now we can actually solve for the EU equivalents units. Step 1 we will start with the completed units for the quarter which was 140,000, next we subtract the beginning EU (10,000 x 70%) = (7,000). Next we add the ending WIP (20,000 X 25%) 5,000 EU of Production 138,000 EU of Production

Question 2

What is cost of jobs completed in January? How to calc?

Answer 2

Cost of jobs use actual material and labor information because direct costs are easy to quanity.

To calc the cost of jobs completed we need to first calc the beginning balance so for this problem we didn’t have a beginnng balance. Since this is cost of jobs completed we will use the “Direct Material”, “actual labor”, and manufacuring overhead. So the problem would start with no beginning balance, next we add “Direct Material” 90,000, next we add “direct labor” 107,000, and finally we add the “applied overhead balance of 113,000 and we get a total of 310,000 total cost