Asked by Michael Kumlien on Apr 29, 2024
Verified
The number of equivalent units of production for the period for materials, if the first-in, first-out method is used to cost inventories, was
A) 16,700
B) 12,000
C) 1,700
D) 13,700
First-In, First-Out Method
An inventory valuation method where the cost of the earliest goods purchased is the first to be recognized in determining cost of goods sold.
Equivalent Units
A concept used in process costing that converts partially completed units into a number of fully equivalent units for the purposes of accounting.
Direct Materials
Materials that can be directly linked to the production process of a product and are essential components of the final product.
- Understand the approach for determining equivalent units of production utilizing the FIFO method.
- Integrate the concept of equivalent units in the assessment of direct materials and conversion costs.
Verified Answer
Equivalent units for units in beginning WIP:
3,000 units x 25% = 750 units
Equivalent units for units started and completed during the period:
15,000 units
Equivalent units for units still in ending WIP:
1,700 units x 95% = 1,615 units
Total equivalent units of production for materials:
750 + 15,000 + 1,615 = 17,365
However, since 13,700 units of direct materials were added during the period, the correct answer is D) 13,700. This is because the FIFO method assumes that the units added first are also completed first, and in this case, all of the 13,700 units added during the period were completed.
Learning Objectives
- Understand the approach for determining equivalent units of production utilizing the FIFO method.
- Integrate the concept of equivalent units in the assessment of direct materials and conversion costs.
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