Exercise 8: Cost reconciliation – FIFO method

Note: In this exercise, we have used the data of Hotex Company from exercise 7. If you have directly come to this exercise, we recommend you try to solve exercise 7 first and then come back to this exercise to continue.

The Hotex Company presents you the following information for July for the first processing department:

Quantity schedule and equivalent units – FIFO method – (taken from exercise 7):

*Work done in July: 25% (= 100% – 75%) with respect to materials and 60% (= 100% – 40%) with respect to conversion.

**Units started – Work in process ending inventory
70,000 – 10,000 = 60,000
Alternatively, this figure can be computed as follow:
Units transferred out – Work in process beginning inventory
75,000 – 15,000 = 60,000

Cost per equivalent unit – FIFO method – (taken from exercise 7):

Required: Using above data, complete the following cost reconciliation for July for the first processing department of Hotex Company.

Solution

Cost reconciliation – FIFO method