Asked by Tejuan Jones on Jun 01, 2024
Verified
Compute the equivalent units for direct materials and conversion respectively for May.
A) 225,000 materials; 195,000 conversion.
B) 275,000 materials; 215,000 conversion.
C) 150,000 materials; 150,000 conversion.
D) 195,000 materials; 225,000 conversion.
E) 195,000 materials; 195,000 conversion.
FIFO Method
An inventory valuation method that assumes that the first items placed in inventory are the first sold, standing for First-In, First-Out.
Equivalent Units
A concept in cost accounting used to convert partially completed goods into an equivalent number of fully completed units for inventory valuation.
Direct Materials
The raw materials used in the manufacturing process that are directly incorporated into the finished product.
- Ascertain the equivalent production quantities by employing the First-In, First-Out method.
- Attain insight into the function and quantification of direct materials, conversion outlays, and equivalent units within the sphere of process costing.
Verified Answer
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Final Answer :
B
Explanation :
To calculate the equivalent units for direct materials and conversion costs, we need to use the FIFO method.
Equivalent units for direct materials:
Work in process, May 1: 50,000 units 100% complete = 50,000 units
Units started and completed in May: (75,000 – 50,000) = 25,000 units
Total equivalent units for direct materials = 50,000 + 25,000 = 75,000 units
Equivalent units for conversion costs:
Work in process, May 1: 50,000 units 40% complete = 20,000 units
Units started and completed in May: (75,000 – 50,000) = 25,000 units
Work in process, May 31: 25,000 units 20% complete = 5,000 units
Total equivalent units for conversion costs = 20,000 + 25,000 + 5,000 = 50,000 units
Therefore the correct option is B) 275,000 materials; 215,000 conversion.
Equivalent units for direct materials:
Work in process, May 1: 50,000 units 100% complete = 50,000 units
Units started and completed in May: (75,000 – 50,000) = 25,000 units
Total equivalent units for direct materials = 50,000 + 25,000 = 75,000 units
Equivalent units for conversion costs:
Work in process, May 1: 50,000 units 40% complete = 20,000 units
Units started and completed in May: (75,000 – 50,000) = 25,000 units
Work in process, May 31: 25,000 units 20% complete = 5,000 units
Total equivalent units for conversion costs = 20,000 + 25,000 + 5,000 = 50,000 units
Therefore the correct option is B) 275,000 materials; 215,000 conversion.
Learning Objectives
- Ascertain the equivalent production quantities by employing the First-In, First-Out method.
- Attain insight into the function and quantification of direct materials, conversion outlays, and equivalent units within the sphere of process costing.