The Finishing Department had 6,100 incomplete units in its beginning Work-in-Pro
ID: 2600232 • Letter: T
Question
The Finishing Department had 6,100 incomplete units in its beginning Work-in-Process Inventory which were 100% complete as to materials and 30% complete as to conversion costs. 17,200 units were received from the previous department. The ending Work-in-Process Inventory consisted of 3,100 units which were 50% complete as to materials and 30% complete as to conversion costs. The Finishing Department uses first-in, first-out (FIFO) process costing.
What are the equivalent units of production for materials during the period?
14,200.
14,100.
15,650.
17,200.
Explanation / Answer
Solution:
To solve this question, we need to know the First in First Out method under process costing.
FIFO Method in Process Costing
Physical Units Count
In FIFO method, the unit of beginning inventory is completed first and then Units received during the period is completed.
Equivalent units of Material
In FIFO method,
- First we calculate the cost per equivalent units of material and conversion by using the cost incurred during the current period i.e. current period cost and divide by equivalent units of production.
- While calculating the equivalent cost per unit of production beginning WIP cost is ignored.
Cost Accounted for:
Cost of Beginning Units is the sum of following
(i) Current Period Cost (i.e. the cost of equivalent production units part of beginning inventory completed during the period and
(ii) the cost of beginning inventory
The part of beginning inventory completed during the period is calculated by multiplying the cost of equivalent units with the completed equivalent part of beginning units during the current period
Ending Inventory
The Ending Inventory is valued at current period cost i.e. the cost added during the current period/month.
It means first incomplete units of work in process beginning are completed in the current period then newly introduced fresh units are completed.
First of all we need to calculate the physical flow of the units
Input
Physical Units
Output
Physical Unit
Beginning Work in Process
6100
Total Units Completed during the period
20200
Units received from previous department
17200
Ending Work in Process
3100
TOTAL
23300
23300
Now we need to calculate the Equivalent Units for Material
Materials
Physical Units
% Completion
Equivalent Units
Units completed from Beginning Work in process (100% already completed in last period. So this time for material it needs not to be completed)
6100
0
0
Units received from previous department and completed during the period
14100
100%
14100
Total Units Completed during the period
20200
14100
Ending Work In Process (50% Complete to material and 30% complete as conversion)
3100
50%
1550
Total
23300
15650
Hence, the Equivalent Production Units for Material is 15,650 Units
The correct option is 15,650 Units
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question. Please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Input
Physical Units
Output
Physical Unit
Beginning Work in Process
6100
Total Units Completed during the period
20200
Units received from previous department
17200
Ending Work in Process
3100
TOTAL
23300
23300
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