Clean Corporation manufactures liquid window cleaner. The following information

Question

Clean Corporation manufactures liquid window cleaner. The following information concerns its work in process: Beginning inventory, 12,000 (50 percent complete with respect to materials and 30 percent complete with respect to conversion costs). Transferred out, 63,000 gallons. Ending inventory (materials are 20 percent complete; conversion costs are 10 percent complete). Started this month, 72,000 gallons. Required: Compute the equivalent units for materials using FIFO. Compute the equivalent units for conversion costs using FIFO. Equivalent units (gallons) Equivalent units (gallons)

Explanation / Answer

Computation of Equivalents Units under FIFO: Equivalent units under FIFO method are calculated using the following formula: Equivalent units for each cost component = (100% A) × B + C + D × E Where, A = percentage of completion at the end of last period B = units in opening work in process C = units added/started and transferred out D = percentage of completion of units in closing work in process E = units in closing work in process Equivalent Units Materials Cost Conversion Cost = (100%-50%)*12,000+63,000+21,000*20% (100%-30%)*12,000+63,000+21,000*10% =             73,200         73,500 Equivalent Units Units   Materials             73,200 Conversion Cost             73,500

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