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    Calculating: conversion cost (FIFO method), # of units completed, # of units in process and department cost

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    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 complete in Department B, the finished compound is transferred to finished goods. The process is continuous, operating 24 hours a day.

    Normal spoilage occurs in Dept. A. 5% of material is lost in the first few seconds of processing.
    No spoilage occurs in Dept. B.

    The following data are available for the month of October:
    Units in process, October 1st is 8,000.
    stage of completion at beg. inventory is 3/4.
    Untis started of transferred in are 50,000.
    Units transferred out are 46,500.
    Units in process, October 31st are UNKNOWN.
    Stage of completion of End. Inven. is 1/3.

    Units in Process, October 1st are 10,000.
    Stage of completion of beg. inven. is 3/10.
    Units started or transferred in are UNKNOWN.
    Units transferred out are UNKNOWN.
    Units in Process, October 31st are UNKNOWN.
    Stage of completion of end. inven. is 1/5.
    units of chemical Y added in dept. B are 44,500.

    A.) Prepare a schedule showing finished equivalents for Chemical X and for conversion cost for Department A using FIFO method.

    B.)Determine for Department B the number of units of good product completed during October and the number of units in process on October 31st.

    C.)Prepare a schedule for department B showing finished equivalents for preceeding department cost, cost of Chemical Y, and conversion cost using the FIFO method.

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    Solution Preview

    1. Using FIFO, the 8000 in the beginning inventory will be transferred out first, which since chemical X is added at the beginning of the process, there's no additional material cost for these 8000 units. And the finished equivalents = 8000*3/4=6000
    Then in the 46500 units transferred out only 46500-8000=38500 units are started in October.

    For the total 50,000 units started, the cost is 50000 pounds of chemical X, which will have a 50000*5%=2500 (pounds) spoilage in Dept A.
    Therefore, ending units in process is
    50000-38500-2500=9000 units (in 1/3), whose finished ...

    Solution Summary

    If you are struggling with this exact problem, or even one just like it, where you are using the FIFO method, this download is for you!

    All math is shown and explanations are given for each step.