Exercise 8: Cost reconciliation – FIFO method

By: Rashid Javed | Updated on: July 12th, 2023

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.

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

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3 Comments on Exercise 8: Cost reconciliation – FIFO method
  1. Romain Garrault

    Hello, thank you very much for your content.
    I wanted to know why are the $143,000 (Costs in the beginning inventory) taken into account in the total Cost accounted for calculation please ?
    I always though that the only costs taken inot account in this calculation are the following :
    – Costs to finish Beginning WIP
    – Costs for Units started and Transferred during the period
    – Costs to “reach” Ending WIP

    Many thanks in advance for your help.

    Best regards.

  2. Romain Garrault

    @RASHID JAVE

    Oh thank you very much, I think I confused the total Cost accounted for and the Total costs that I have to take into account while I calculate the cost per EUP..

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