- The FIFO method of calculating equivalent production and unit costs
a. is less likely to be accurate than the weighted-average method.
b. is more useful for control purposes than the weighted-average method.
c. cannot be used unless a company also uses standard costing.
d. eliminates the need to calculate separate equivalent-production numbers for each element of manufacturing cost.
- Backflushing, or backflush costing
a. requires significantly less recordkeeping than other methods.
b. can be used by any company.
c. ignores inventories.
d. does not distinguish between materials and conversion costs.
- Scooter Corp had no beginning inventories, finished 40,000 units, and sold 36,000 units. There were no ending inventories of materials or work in process. Materials purchased and used were $225,000; direct labor and overhead were $170,000. Ending inventory would be valued at
a. $17,000.
b. $22,500.
c. $39,500.
d. some other number.
- Scooter Corp had no beginning inventories, finished 40,000 units, and sold 36,000 units. There were no ending inventories of materials or work in process. Materials purchased and used were $225,000; direct labor and overhead were $170,000. Cost of goods sold would be valued at
a. $39,500.
b. $355,500.
c. $395,000.
d. some other number.
- Dewey Company had a beginning inventory of 3,000 units 35% complete, and an ending inventory of 2,500 units 20% complete. If 17,500 units were completed, weighted-average EUP is
a. 17,500.
b. 18,000.
c. 18,550.
d. 20,000.
- Dewey Company had a beginning inventory of 3,000 units 35% complete, and an ending inventory of 2,500 units 20% complete. If 17,500 units were completed, FIFO EUP is
a. 17,500.
b. 16,950.
c. 16,050.
d. 15,050.
- Cheatem has a weighted-average EUP of 30,000 units. Beginning inventory was 4,000 units 40% complete; ending inventory was 5,000 units 60% complete. The number of units completed is
a. 27,000.
b. 29,000.
c. 30,000.
d. 31,000.
- Cheatem has a weighted-average EUP of 30,000 units. Beginning inventory was 4,000 units 40% complete; ending inventory was 5,000 units 60% complete. FIFO EUP is
a. 25,400.
b. 28,400.
c. 30,000.
d. 31,000.
- Howe has a FIFO EUP of 46,580 units. Beginning inventory of 6,500 units was 80% complete; the ending inventory of 2,800 units was 60% complete. How many units were completed during the period?
a. 39,700
b. 44,900
c. 46,200
d. 50,100
- Howe has a FIFO EUP of 46,580 units. Beginning inventory of 6,500 units was 80% complete; the ending inventory of 2,800 units was 60% complete. Weighted-average EUP is
a. 46,580.
b. 47,880.
c. 51,780.
d. some other number.
The Correct Answer and Explanation is :
Correct Answers:
- (b) is more useful for control purposes than the weighted-average method.
- (a) requires significantly less recordkeeping than other methods.
- (b) $22,500.
- (c) $395,000.
- (c) 18,550.
- (b) 16,950.
- (b) 29,000.
- (b) 28,400.
- (b) 44,900.
- (b) 47,880.
Explanation
The FIFO method is often preferred for control purposes since it separates costs for the current period from those of previous periods, unlike the weighted-average method, which blends costs. This separation allows managers to evaluate performance more accurately.
Backflush costing is used primarily in just-in-time (JIT) systems and reduces recordkeeping by eliminating the need for tracking individual units through different production stages. Instead, costs are assigned at the end of production, minimizing paperwork.
Scooter Corp’s inventory valuation and cost of goods sold (COGS) are determined by calculating the unit cost based on total production costs divided by units produced. Since 40,000 units were produced at a total cost of $395,000, the per-unit cost is $9.875. The ending inventory of 4,000 units is valued at $22,500, and the COGS for 36,000 units is $395,000.
For Dewey Company, the weighted-average equivalent units of production (EUP) include completed units plus the equivalent of ending inventory. Applying the formula for EUP calculation, we determine 18,550 for the weighted-average method and 16,950 for FIFO, accounting for the different treatment of beginning inventory.
Cheatem’s weighted-average EUP calculation considers the number of completed units and the equivalent of ending inventory, arriving at 29,000 completed units. The FIFO method adjusts for beginning inventory, leading to a different EUP of 28,400.
Howe’s calculations use similar principles, with FIFO EUP at 46,580 and weighted-average at 47,880, reflecting the impact of beginning and ending inventory completion percentages.
Understanding these concepts is crucial for cost accounting and managerial decision-making.