Explore BrainMass


The first in, first out cost formula, better known as FIFO, assigns costs based on the cost flow assumption that inventory is used up or sold in the order in which it was purchased. Therefore, the costs associated with the earliestpurchases are assigned to the goods that are first used or sold. The costs associated with ending inventory are the most recent purchase costs.

For example, consider a merchandising company that makes purchases throughout the year of the following amounts. 

We also know the company had a beginning inventory of 200 units each worth $10.50, and an ending inventory of 250 units. To calculate the value of the ending inventory, we assume that 200 units are from the November 2nd order batch and 50 units are from the September 3rd order batch. 

We can then calculate the cost of goods sold by adding our purchases to our beginning inventory and subtracting this value of ending inventory. 

The FIFO cost flow assumption should be used when a firm typically sells its oldest inventory first. When this is the case, the FIFO method will reasonably approximate the specific unit cost method. At the same time, when a company adheres to the FIFO method, it prevents the manipulation of income because the costs that are charged to expenses each period must be determined the same way. Similarly, by valuing inventory based on the cost of the company's most recent purchases, the value of inventory under FIFO method closely resembles the actual replacement cost of inventory.

FIFOs basic disadvantage is that by valuing inventory at current prices, the value of cost of goods solds is based on the oldest costs. This may mean that current expenses are not matched against current revenues. This may distort gross profit and income, particulaly when prices are changing rapidly.   

Santanderio Inc.: Consolidated Financial Statements

Please assist showing the math. The below chart which is already completed attached is needed to complete. SANTANDERIO INC. 1.This small New York Company is a distributor of special electronic lamps. These lamps are purchased by laboratories and research centers throughout the country. Retained Earnings, 12/31/2000 (Be

Queue Discipline

1. Provide an example of when a first-in, first-out (FIFO) rule for queue discipline would not be appropriate. 2. a. The Dynaco Manufacturing Company produces a particular product in an assembly line operation. One of the machines on the line is a drill press that has a single assembly line feeding into it. A partially comple

FIFO costing method

Liquid Extracts Company produces a line of fruit extracts for home use in making wine, jams and jellies, pies, and meat sauces. Fruits enter the production process in pounds; the product emerges in quarts (1 pound of input equals 1 quart of output). On May 31, 4,250 units were in process. All direct materials had been added, and

Evaluating the Maple Company and Teague Company

Problem 1. Maple Company started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first unit cost $800 and the second, $700. One of the items was sold during the year. Required: Based on this information, how much product cost would be allocated to cost of goods so

EVA Briggs & Stratton problem 10.30

Problem 10: 30 - EVA at Briggs & Stratton Briggs & Stratton Corporation is the world's largest maker of air-cooled gasoline engines for outdoor power equipment. The company's engines are used by the lawn and garden equipment industry. According to the company's annual report, the " management subscribes to the premise that th

FIFO Inventory Management and a Firms EBITDA

Please help with the following problem. In 2010, Jack's Art Gallery sold 200 original works of art for $1,240,520. The gallery acquired the works sold for $530,000. Each painting was framed using predesigned framing kits in the gallery's own workshop. The firm bought 100 kits in January for $50,000, 100 kits in March for $60

Waiting line theories and models

Waiting line theories are valuable tools in operations. One model is based on the Poisson arrival distribution, FIFO line discipline, and customers arrive at the rate of two per minute. This is a single phase operation and each server operates at the average rate of 160 customers served per hour. Management is concerned by th

Loading Dock Queuing

See the attachments. Deliveries clogging the loading dock area The specific details regarding the delivery process at the receiving dock. 1-Receiving dock open from 7am to 3pm, 8 hours, or 480 minutes. 2-The average number of arrivals on any given day is 28, which is 3.5 arrivals per hour, average. 3-The data we have c

Pantanal, Inc. - Process Costing- FIFO

See the attachment. Pantanal, Inc., manufactures car seats in a local factory. For costing purposes, it uses a first-in, first-out (FIFO) process costing system. The factory has three departments: Molding, Assembling, and Finishing. Following is information on the beginning work-in-process inventory in the Assembling Departme

Cost Accounting: FIFO process costing, undercosting, ABC systems

1. The last step in the FIFO process-costing method is _____. a) assign total costs to units completed b) computer output in terms of equivalent units c) summarize total costs to account for d) compute costs per equivalent unit 2. Undercosting a particular product may result in _____. a) loss of market share b) lowe

FIFO Production Cost Report

The following information is available for the Molding department for January. Work in process beginning: Units in process 22,000 Stage of completion for materials 80% Stage of completion for labor and overhead 30% Costs in work in process inventory: Materials $168,360 Labor 67,564 Overhead 17,270 Tota

FIFO Process Costing for Pancocha Company: Equivalent units and costs

See file attached. Additional Information that is needed: Materials are added at the beginning of the production process and conversion costs are incurred uniformly. They use the FIFO method Pacocha Company manufactures bicycles and tricycles. For both products, materials are added at the beginning of the production proces

Equivalent Units for Direct Materials and Conversion Costs

Spunky Corporation uses a process costing system. All direct materials are added at the beginning of the process. Spunky's production quantity schedule for May is reproduced below: Units Work in Process on May 1 (conversion 60% complete)............... 1,000 Units started during production.

Inventoriable Costs

E8-1 (Inventoriable Costs) Presented below is a list of items that may or may not be reported as inventory in a company's December 31 balance sheet. 1. Goods out on consignment at another company's store. 2. Goods sold on an installment basis (bad debts can be reasonably estimated). 3. Goods purchased f.o.b. shipping point

Good Foods, Inc Process Costing: Using FIFO, prepare a process cost report

Canned fruits and vegetables are the main products made by Good Foods. Inc. All direct materials are added at the beginning of the Mixing Department's process. When the ingredients have been mixed, they go to simmered for 20 minutes. When cooled, the mixture goes to the Canning Department for final rocessing.

Study Guide 2

I need help please so I can make sure I study properly. 1. Total stockholders' equity represents a. a claim to specific assets contributed by the owners. b. the maximum amount that can be borrowed by the enterprise. c. a claim against a portion of the total assets of an enterprise. d. only the amount of earnings that hav

T&R Company: Select correct factory overhead incurred, gross profit, FIFO method

The T&R Company's production costs for August are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production equipment, $800; heat, lights and power, $1,000; and insurance on plant and equipment, $200. T&R Company's factory overhead incurred for August is a. 2,000 b. 6,500 c. 8,5

Sellalot Corporation: cost reconciliation using FIFO and equivalent units

Could somebody please review my calculations and fix where I made a mistake ? Please see atached problem and attached calculations The Sellalot Corporation makes specialty prepared soups for the wholesale restaurant industry in a one department operation. The soup ingredients materials are all added at the start of th

Ricko Inc. uses the FIFO method in its process costing system

Ricko Inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month. Work in process, beginning: Units in process 900 Stage of completion with respect to materials 80% Stage of completion with respect to conversion

Determining Cost of Goods for Classic Distribution Markets

Classic distribution markets CD's of numerous performing artists. At the beginning of March, Classic had in beginning inventory 1,500 CD's with a unit cost of $7. During March, Classic made the following purchases of CD's March 5 2,000 @ $8 March 13 5,500 @ $9 March 21 6000 @ $10 March 26 2000 @ $11 During March 13,000 uni

On December 1, Bargain Electronics Ltd. has three DVD players left in stock.

Please give detailed explanation. On December 1, Bargain Electronics Ltd. has three DVD players left in stock. All are identical, all are priced to sell at $150. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of $100. Another, with serial #1045, was purchased on November 1 for

Prepare a production cost worksheet using the FIFO method

Surf Products Company uses an automated process to clean and polish its souvenir items. For March, the company had the following activities: Beginning work in process inventory 3,000 items, 1/3 complete Units placed in production 12,000 units Units completed

Sampson Company's MACRS tax depreciation

Sampson Company is a C corporation that uses a calendar year and the accrual method of accounting for tax purposes. Sampson Company is a domestic (U.S.) manufacturer of electric motors and all of its gross receipts and related deductions are derived from domestic (U.S.) production activities. the following information was obtain

Equivalent units using FIFO

A)Schiller Company has unit costs of $5 for materials and $15 for conversion costs. There are 4,200 units in ending work in process which are 25% complete as to conversion costs, and fully complete as to materials cost. How much is the total cost assignable to the ending work in process inventory if the FIFO method is used? b

Calculating: conversion cost (FIFO method), # of units completed

The formula for a chemical compound requires one pound of Chemical X and one pound of Chemical Y. In the simplest sense, one pound of Chemical X is processed in Department A and transferred to Department B for further processing where one pound of Chemical Y is added when the process is 50% complete. When the processing is comp