• Profile photo of John Moffat says

      It depends what information you are given.

      For FIFO, you need to know the % complete for each cost in the opening WIP. If you are not given this then you cannot do FIFO and it has to be AVCO.

      For AVCO, you do not need the % complete, but you do need to know the value of the opening WIP split between the individual costs (materials, conversion costs etc.). If you are not given the values then it cannot be AVCO and it has to be FIFO.

      (If you are given all of the above information, then the question will specify whether it is FIFO or AVCO)

    • Profile photo of John Moffat says

      Because we are using FIFO we need to know how many units were started and finished during the period.
      It is 12,000 units. (14,000 were finished, but 2000 had already been started in the previous period).

      Then we need to know the cost per unit for materials and for conv costs.

      For materials, WIP is always 100% finished for materials, and so we spent $51,000 on 15,000 units (opening WIP needed no more materials; 12,000 with full work need full material; 3,000 closing WIP need full materials)
      So the cost per unit for materials is $51,000 / 15,000 = $3.40.

      For conversion cost, we spent $193,170. The effective units were: finishing the WIP – 40% work this period to finish opening WIP of 2000 units is 800 units. Done completely 12,000 units. 30% work this period to start the 3000 closing WIP is 900 units.
      So total effective units is 800 + 12000 + 900 = 13,700
      So the cost per unit for conv costs is 193170 / 13700 = $14.10

      Finally, to value the closing WIP:

      Materials: 100% finished so 3,000 units x $3.40 = $10,200
      Conv costs: 30% finished so 3,000 units x 30% x $14.10 = $12,690

      Total = $22,890

  1. Profile photo of fizzanaqvi says

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