Forthefunofit Ltd uses a process costing system. Direct materials are added at the beginning of the process. During January, Department A had a beginning inventory of 2,000 units, 50% complete for conversion costs. During the month 14,000 units were started and there were 1,000 units in ending inventory, 40% complete for conversion costs. Using FIFO process costing, the equivalent units for direct materials for the month were:
A) 13,600
B) 16,600
C) 16,000
D) 14,000

Question

Quizplus · Accepted Answer

Under the FIFO method, equivalent units for direct materials are calculated based on units started and completed during the period. Since direct materials are added at the beginning of the process, all units started during the period (14,000) would have received direct materials, regardless of their stage of completion by the end of the period.

Forthefunofit Ltd Uses a Process Costing System