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FIFO Cost Accounting

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In November 2013, Lamb Co. computed its equivalent unit costs under FIFO process costing as follows:

Direct Material $29.50
Packaging 3.00
Direct labor 10.84
Overhead 7.68

Direct material and packaging are added at the start and end of processing, respectively. Beginning inventory cost was $1,026,810 and consisted of
* $789,040 direct material cost for 54,000 EUP.
* $91,862 direct labor cost for 16,200 EUP.
* $145,908 overhead cost for 18,900 EUP.

Lamb Co. transferred a total of 370,000 units to finished goods during November and had 12,000 units in ending WIP Inventory. The ending inventory units were 30 percent complete as to direct labor and 55 percent complete as to overhead.

a. What percentage complete were the beginning inventory units as to direct material? Packaging? Direct labor/ Overhead?
b. What was the total cost of the completed beginning inventory units?
c. What was the cost of the units started and completed in November?
d. What was the cost of November's ending inventory?
Please use excel and show the formulas so I will know where all figures come from.

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Solution Summary

The solution is provided in excel format showing calculations using cell references (which means that if you change the numbers originally given in the problem, excel would calculate the solution automatically).

$2.19
See Also This Related BrainMass Solution

Financial Accounting : FIFO and LIFO Applied

Please see the attached file for the fully formatted problems.

P6-4A The management of Aurora Co. is reevaluating the appropriateness of using its present inventory cost flow
method, which is average cost. They request your help in determining the results of operations for 2002 if either the FIFO
method or the LIFO method had been used. For 2002, the accounting records show the following data.

Inventories Purchases and Sales
Beginning (15,000 units) 34,000 Total net sales (225,000 units) $865,000
Ending (20,000 units) Total cost of goods purchased
(230,000 units) $591,500

Purchases were made quarterly as follows.

Quarter Units Unit Cost Total Cost
1 60,000 $2.40 $144,000
2 50,000 2.5 125,000
3 50,000 2.6 130,000
4 70,000 2.75 192,500
230,000 $591,500

Operating expenses were $147,000 and the company's income tax rate is 32%

Instructions
(a) Prepare comparative condensed income statements for 2002 under FIFO and LIFO. (Show computations of ending
inventory.)

(b) Answer the following questions for management.

(1) Which cost flow method (FIFO or LIFO) produces the more meaningful inventory amount for the balance sheet? Why?
(2) Which cost flow method (FIFO or LIFO) produces the more meaningful net income? Why?
(3) Which cost flow method (FIFO or LIFO) is more likely to approximate actual physical flow of the goods? Why?
(4) How much additional cash will be available for management under LIFO than under FIFO? Why?
(5) Will gross profit under the average cost method be higher or lower than (a) FIFO and (b) LIFO?
(Note: It is not necessary to quantify your answer.)

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