Learning Objective 03-C2: Appendix-Compute process activity costs and prepare a production cost report using FIFO.

 Learning Objective 03-C2: Appendix-Compute process activity costs and prepare a production cost report using FIFO.

The FIFO method for process costing is applied and illustrated to (1) report the physical flow of units, (2) compute the equivalent units of production, (3) compute the cost per equivalent unit of production, and (4) assign and reconcile costs.

The FIFO method assigns costs to units assuming a _____ flow of product.

multiple choice

    first-in, last-out
    last-in, first-out
    first-in, first out Correct
    average

Explanation

Knowledge Check 01

The FIFO method assigns costs to units assuming a first-in, first-out flow of product.

Knowledge Check 01

Step 1 in FIFO process costing is to determine:

multiple choice

    cost per equivalent unit
    equivalent units
    physical flow of units Correct
    cost of beginning inventory

Explanation

Knowledge Check 01

In Step 1, we determine the physical flow of the units. A physical flow reconciliation is a report that reconciles the physical units started in a period with the physical units completed in that period.

During the current year, a manufacturing company had the following activity.

    Units in beginning work in process: 10,000 at 70% complete.
    Units started into production: 150,000.
    Units completed during the year: 140,000.
    Units in ending work in process: 20,000 units at 25%.


What is the number of equivalent units using the FIFO method?

multiple choice

    140,000
    145,000
    138,000 Correct
    150,000

Explanation

Knowledge Check 01

Equivalent units using FIFO = Beginning work in process of 3,000 units (or 10,000 units × (100% − 70% complete)) + Units started and completed of 130,000 (or 140,000 completed − 10,000 in beginning inventory) + Ending work in process of 5,000 (or 20,000 units × 25% complete) = 138,000.

Knowledge Check 01

Step 3 in FIFO process costing is to determine:

multiple choice

    cost per equivalent unit Correct
    equivalent units
    physical flow of units
    cost of beginning inventory

Explanation

Knowledge Check 01

Step 3 is to compute the cost per equivalent unit by taking the direct materials and conversion costs added in the month and dividing by the equivalent units of production from Step 2.