Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 36

FIFO Method Taxes R Us (TRU), an income tax preparation firm, uses the FIFO method of process costing for the monthly reports. TRU has no materials cost in the preparation of the returns. The fol­lowing shows its March information:

Returns in process, March 1 (30% complete)	100
Returns started in March	1,600
Returns in process, March 31 (90% complete)	200
Labor and overhead costs for returns in process, March 1	$ 2,500
Labor and overhead costs incurred in March	$173,250

Required Calculate the following amounts for conversion costs using the FIFO method:

1. Equivalent units.

2. Cost per equivalent unit.

3. Cost of completed returns for the month of March.

4. Cost of returns in process as of March 31.

Step 1 of 5

FIFO method of process costing:

FIFO method of process costing assumes that all the units in the opening work in progress will be completed first and hence, it includes the cost of opening work in progress inventory in the units completed during the period only and not on the all the available units.