(Appendix)

Process costing with a fifo cost flow assumption

Under the fifo cost flow assumption, the cost of the first units transferred out of the

department are deemed to come from beginning inventory.

If the units in inventory are not complete at the beginning of the period, they must be
completed with current period costs before they can be transferred out of the

department.
The balance of the units to be accounted for contained only current period cost.
As a consequence of this inventory layering procedure, equivalent units are computed

for current period cost only.

Total current period equivalent unit is the sum of the equivalent units of current period
costs added to complete the units in the beginning inventory plus the number of units
started and completed during the current period, plus the equivalent in ending

inventory.
To compute the equivalent units of current period cost required to complete the units
in beginning inventory, the stage of completion of the beginning inventory must be

known.
The cost per equivalent unit for each element of current period cost is determined by
dividing the cost added during the current period for each cost elements by the
number of equivalent units of that cost elements added in the current period.