Question

FIFO Question: The Rest-a-Lot chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 75,000 chairs. During the month, the firm completed 80,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Rest-a-Lot. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs.

What were the equivalent units for conversion costs during February under the FIFO method?

		83,500
		85,000
		75,000
		79,500

Answer 1

Answer

Option (a)

83500

Completed Chairs Production            80000

Transferred to finishing Department 80000

Closing Inventory Chair 10000

Opening Inventory Chair 15000

Beginning WIP 30% completion

Ending WIP 80% Completion

(Opening Inventory 15000*70%)+(Completed Unit 80000-15000)+Cloing Invetory (10000*80%)=83500

(15,000 x 0.7) + 65,000 + 10,000 (0.8) = 83,500