FIFO Costing Method
Posted: November 30th, 2013
FIFO Costing Method
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Course:
Date:
FIFO Costing Method
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GOOD FOODS INC. |
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PROCESS COSTING REPORT USING FIFO METHOD |
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AS AT JANUARY 31 |
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| accounting for physical units | Beginning inventory | |||||
| Units started last month |
5000 |
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| Units started this month |
90000 |
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| To account for |
95000 |
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|
accounting for equivalent units |
physical units |
Direct materials |
% incurred |
Conversion |
% incurred during period |
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| Beginning inventory completed Jan |
5000 |
_ |
0 |
3000 |
60 |
|
| Started & completed Jan |
89000 |
89000 |
100 |
89000 |
100 |
|
| Started but not complete |
1000 |
1000 |
100 |
1000 |
100 |
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| Units accounted for |
95000 |
90000 |
93000 |
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|
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accounting for costs |
Total cost | |||||
| Beginning cost |
33790 |
28560 |
Add |
5230 |
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| Current cost |
631200 |
450000 |
Add |
181200 |
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| Total |
664990 |
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Total cost | |||||
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cost per equivalent unit |
current units | (450000/90000) | (181200/93000) | |||
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5 |
1.9483871 |
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|
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goods transferred & ending inventory |
From beginning inventory |
33,790 |
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| Current costs to complete |
5,845 |
0 |
(3000*1.9483871) | |||
| Units started & completed |
618,406 |
(89000*5) | Add | (89000*1.9483871) | ||
| ending inventory |
6,948 |
(1000*5) | Add | (1000*1.9483871) | ||
| TOTAL COST |
664,990 |
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The analysis of the cooking department will be quite different form the mixing department. The cooking department’s output will depend on the output of the mixing department. When the mixture is cooking, no more can be added. Therefore, at the cooking department costs will only involve conversion costs, which are the normal labor costs and overheads. Since no direct materials are added in this process, there shall be no physical costs. In the mixing department, the costs involve five steps, which are accounting for physical units, equivalent units, costs, cost per equivalent unit, and goods transferred to cooking department. For the cooking department, most of these processes will not be there since it only involves heating and simmering the mixture. Once the cooking process begins, it cannot be stopped. In this department, there is no ending inventory since all the mixture was cooked and no spillage or evaporation took place. Additionally, there is no beginning inventory within this department since no materials can be added during the process. Thus, all material that came in was cooked and transferred to the canning department for the final process. The work in progress, in this department, involves the amount of mixture that is cooking, while the inventory will be the mixture waiting to be cooked (Crosson & Needles, 2010).
Reference
Crosson, S.V. & Needles, B.E. (2010). Managerial Accounting. New York, N.Y: Cengage Learning.
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