Hoodies Ltd. uses the First-In, First-Out (FIFO) process costing method to produce hoodies that pass through three processes: cutting, stitching, and packaging. In the stitching department, all materials are added at the beginning of the process and conversion costs are incurred evenly throughout the manufacturing process. The accountant of Hoodies Ltd. collected the following information for the month of October:

• 600,000 units were completed and transferred out.
• Direct materials cost of $5,800,000 and conversion costs of $600,000 were incurred during October.
• There were 60,000 units in beginning work-in-process on 1^st October that were 40% complete as to conversion and the related costs were $1,200,000 for direct materials and $150,000 for conversion costs.
• Ending work-in-process on 31^st October had 40,000 units that were 60% complete as to conversion.

Required:

a)Calculate the cost per equivalent unit for direct materials and conversion.

b)Calculate the cost of goods completed and transferred out, the cost of ending work-in-process and total costs accounted for during October.

c)Would you recommend Hoodies Ltd. to continue to use the FIFO costing method or should it consider alternative process costing methods? Explain.

Answer rating: 100% (QA)

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