Question

MacCorp uses process costing. Conversion costs are added continuously throughout the process and direct materials are added at the beginning. During February, Department B had a beginning inventory of 2,000 units, 40% complete. Department A transferred out 18,000 units during the month to Department B. 4,000 units were still 60% incomplete at the end of February in Department B.

Using FIFO process costing, the equivalent units for direct materials for the month in Department B were?

a. 15,600 b. 16,400 c. 18,000 d. 20,000

Using FIFO process costing, the equivalent units for conversion costs for the month in Department B were?

a. 16,400 b. 16,800 c. 17,200 d. 17,600

Answers are in bold. Unable to get to answer, please show work.

Answer 1

FIFO method :

As the materials are added at the beginning of the process, they 100% completed when they are introduced in the process .

Units received from Department A	18000
(-) Ending work in process units	4000
Units started and completed during the period	14000

	Materials	Conversion
Units started and completed during the period	14000	14000
(+) Beginning work in process equivalent units [ Beginning work in process units * ( 1 - % Completion ) ]	0 [ 2000*(1-100%) ]	1200 [ 2000*(1-40%) ]
(+) Ending work in process equivalent units [ Ending work in process units * % Completion ]	4000 [ 4000*100% ]	2400 [ 4000*60% ]
Equivalent units of production	18000	17600