Department A had 1,000 units in Work in Process that were 60% completed at the beginning of the period at a cost of $7,000.During the period, 4,000 units of direct materials were added at a cost of $8,200, and 4,500 units were completed.At the end of the period, 500 units were 40% completed.All materials are added at the beginning of the process.Direct labor was $28,700 and factory overhead was $4,510.The cost of the 500 units in process at the end of the period if the first-in, first-out method is used to cost inventories was
A)$3,240
B)$5,175
C)$2,569
D)$2,607

Question

Quizplus · Accepted Answer

Under the FIFO method, the cost of ending WIP is based on the costs incurred during the current period. The 500 units are 40% complete, so the equivalent units for conversion costs are 200 (500 units * 40%). The cost per equivalent unit for conversion costs is calculated by dividing the total conversion costs ($28,700 + $4,510) by the equivalent units for conversion (4,500 completed + 200 ending WIP = 4,700). The cost of ending WIP is then the cost of materials ($8,200/4,000 units * 500 units) plus the conversion cost (200 equivalent units * conversion cost per unit). This calculation results in approximately $2,607.

Department a Had 1,000 Units in Work in Process That