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Another big part of my life is education. It’s not all geekery and new technology . I am also a business student and ravenous learner. I am a firm believer in always seeking out new opportunities to learn. As I am about to finish up my MBA program at Strayer University, I thought it might be helpful to share some of the tools and knowledge that I have used throughout my program with other students (whether they go to Strayer University or not).

With that said, I am starting a new category called “Perpetual Student.” I will try to keep these posts as generic (non-Strayer specific) as possible. Often these posts will have two categories. One will be called “Perpetual Student” and the other will be whatever the subject matter is. In this inaugural post, the secondary category will be “Managerial Accounting.”

Your accounting professor can usually do a better job of explaining the First In First Out (FIFO) method of evaluating “equivalent unit” (EU) conversion costs than I can. However, if any of this sounds familiar to you, you must be an accounting student or an accountant . When I was working through my FIFO problems in my Managerial Accounting class, I created a FIFO spreadsheet to help me.

Basically, you fill in all the numbers above the production report area and the rest works itself out. I have populated the spreadsheet with data so you can see how it works. I highly recommend studying the formulas in this spreadsheet to get a better grasp on what is actually going on with the FIFO method.

One of the main things to remember with the FIFO method is that “work in process beginning inventory” is ignored when calculating “equivalent units” (EU’s). Only costs during the current period are accounted for. Hence, you will notice in the first “EU” box in the Production Report area that the beginning inventory work in progress percentage is subtracted (from 100%).

Anyway, I hope you find this spreadsheet to be a useful learning tool. Here is the file:

FIFO Method

If you have any questions about it, just leave a comment. Happy Calculating!

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Technorati Tags: Accounting, Business, Education