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Dear sir,
i have an example about using FIFO on process costing. Please check out that i do it right or wrong. thank you very much !
EX: At the beginning there were 15,000 units of wip valued as follows:
Materials (100% complete): $9,000
Labour and overheads (40% complete): %1,250
The following costs were incurred in this period:
Materials( 30,000 units): $24,900
Labour and overheads: $20,075
And there were 5,000 units of wip at the end of the period (100% complete for materials and 50% complete for labour and overheads)
( assume that use the FIFO approach and there were no losses)I caculated the cost per unit as bellow:
the cost per unit= ($9,000+$24,900)/(30,000+15,000)+ $20,075/(15,000*0.6+25,000+5000*0.5)= $1.3
Please tell me the result is wrong or right. if i was wrong please correct it for me.
Thank you very much sir 🙂
Best Regards,
ThuI am very puzzled as to why you have asked this question. This example is on page 67 of our Course Notes – I go through it in the free lecture, and the answer is also printed at the end of our Course Notes!!!!
Anyway, you are half right 🙂
Your calculation of the overhead cost per unit is correct: 20075/(9000 + 25000 + 2500) = $0.55
However, your calculation of the material cost per unit is wrong. With FIFO we are only looking at this periods cost (you have done materials as though using average cost).
The correct unit cost for materials is 24,900 / 30,000 = $0.83.So the total cost is $1.38 per unit.
Thank you so much for replying me Sir ,
I fully understand now 🙂
Because i didn’t find the answer, So i just do all the questions by myself. I’m not sure that i did right or not. I’ll find all other answers and check all of them.Hope you have a nice day ^^
Best Regards,
Thu
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