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# MGT402 Cost & Management Accounting No 2 Solution & Discussion Due Date:07-06-2012

Topic: Process Cost Accounting - FIFO Costing Method
Learning Objectives:
The learning objective of this Assignment No. 02 is to encourage the students for
applying their knowledge about FIFO costing, which they have learned during
lesson No. 01 to 27. This will enhance the understanding of the students about
FIFO costing method.
Learning Outcomes:
After solving this Assignment No. 02 the learners (students) are well aware about
the FIFO costing techniques used for calculating the closing WIP cost and the
finished goods inventory.
The Case
Science Developers – a lab instruments manufacturing and marketing company is working in far
flung hilly areas of world renowned Scientific Country. At present, the company is involved in
manufacturing and marketing of one of its famous chemical brand – Chemical. The Country’s
Government has recently given the company an order for delivering Chemical in 500,000 lbs.
The Company has started its work on the project on 1st February, 2012. The company has the
policy to cost material and units on the FIFO method.
On 30th April, 2012, Mr. Processor – In-charge of processing department, presented following
monthly report to Mr. Chief. This report contains information about inventories, costs and
production as under:
March 30 April 30
Materials 100,000 lbs 80,000 lbs
Materials cost Rs. 100,000 ----
Work In Process Inventories:
All Materials, 40% completed as to labor and FOH 20,000 units
Cost Rs. 84,000
All Materials, 331/3% completed as to labor & FOH 30,000 units
Finished goods inventory 40,000 units 24,000 units
Cost Rs. 448,000
Purchase of Materials 440,000 lbs @ Rs. 1.10 per lb
Transferred to production 460,000 lbs
Production ratio – 2 lbs: 1 of Chemical
Completed during the month 220,000 units
Direct Labor Rs. 1,198,800
Factory Overhead Rs. 421,800
Requirement:
Calculate the following: (6 marks each)
a) Equivalent production units of material, labor and FOH
b) Unit costs of three cost elements
c) Cost of units transferred to finish goods inventory, using FIFO costing method.
d) Cost of the ending Work in process inventory
e) Number of units sold and the cost of the finished goods inventory on April 30, 2012 using
the FIFO method.
Instructions:
Please read the following instructions carefully before preparing the assignment solution:
 All Supporting Formulas and calculations are required as they carry marks.

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### Replies to This Discussion

 a) Equivalent Production Units of Material , Labor and FOH Opening Closing Material 220,000 + (20,000 x 0%) 220,000 (30,000 x 100%) 30,000 250,000 Labor 220,000 + (20,000 x60%) 232,000 (30,000 x 33.33%) 10,000 242,000 FOH 220,000 + (20,000 x60%) 232,000 (30,000 x 33.33%) 10,000 242,000

IN FIFO METHOD

completed unit- o/p inventory+c/s inventory

MATERIAL          220,000-20,000+30,0000 =230,000

LABOR                220,000-20,000+(20,000*60%)+(30,000*33.33%)=222000

FOH                  220,000-20,000+(20,000*60%)+(30,000*33.33%)=222000

in FIFO method o/p inventory is subtracted from completed units and add c/s inventory

plz explains Ur solution how u fine them

ok .. aap phir apne solution ka cross check send karain phir...i am little confused....hmmmm

 b) Unit Costs of Three Cost Elements Cost Unit Per Unit Cost Material ( 460,000 x 1.10) 506,000 250,000 2.024 Labour 1,198,800 242,000 4.953719008 FOH 421,800 242,000 1.742975207 Total Per Unit Cost 8.720694215
 c) Cost of units transferred to finish good inventory, using FIFO costing method Units Transfer 220,000 Total per unit cost 8.720694215 (220,000 x 8.720694215) 1,918,552.73
 d) cost of the ending work in process inventory Material               (30,000 x 100 % x 2.024) 60,720.00 Labor                    (30,000 x 33.33 % x 4.953719) 49,537.19 FOH                       (30,000 x 33.33 % x 1.742975) 17,429.75

e) Number of units sold and the cost of the finished goods inventory on April 30, 2012 using the FIFO method

 Unit Sold Reverse Calculation Units Sold 236,000 Add Opening 40,000 Less Closing -24,000 Units Produced 220,000

 Cost of Finish Good Inventory Finish goods inventory (24,000 x 8.720694) 209,296.656

Last day aik post ki thi woh is solution ka cross check hay ...

This is it??? the correct answer??? I m so very confused plx help

Yes in my openion its a correct answers. assignments contains 5 parts and i solved those 5 part. and each part have seprate answer. if you can see my last idea solution you can eassily understand because thats was cross check of this solution. In costing every question have a cross check.

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