Information concerning Department A of Ali Company for the month of June is as follows: Units
Materials
Costs
Work in process,beginning of month
20,000
$14,550
Started in June
85,000
$66,300
Units completed
90,000
Work in process,end of month
15,000
All materials are added at the beginning of the process.Using the first-in,first-out method,the cost (rounded to two places)per equivalent unit for materials for June is:
A)$0.63.
B)$0.90.
C)$0.77.
D)$0.78.

Question

Quizplus · Accepted Answer

The cost per equivalent unit for materials using the FIFO method is calculated by taking the cost of materials added during the month ($66,300) plus the cost of beginning work in process materials ($14,550), subtracting the cost of ending work in process materials (since all materials are added at the beginning, this is $0 for the 15,000 units in ending WIP), and dividing by the number of units completed (90,000). However, since FIFO method is used, we only consider the costs added for the units started and completed this month. The beginning inventory costs are not mixed with the costs of the units started and completed in June. Therefore, the calculation should only consider the costs added during June and the units completed that were started in June. The correct calculation is $66,300 / 85,000 (since all materials are added at the beginning, and we're considering the units started this month for FIFO). However, the provided calculation approach was incorrect. The correct approach for FIFO is to calculate the cost of materials for units completed during the month, excluding the beginning inventory when calculating per unit cost. Given the data, the calculation should focus on the costs and units directly associated with June's production, leading to a recalculated cost per equivalent unit.

Information Concerning Department a of Ali Company for the Month