Department S had no work in process at the beginning of the period. It added 12,000 units of direct materials during the period at a cost of $84,000; 9,000 units were completed during the period; and 3,000 units were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. Direct labor was $49,500 and factory overhead was $9,900.
-The following production data were taken from the records of the Finishing Department for June: Inventory in process, June 1, 25% completed
1,500 units
Transferred to finished goods during June
5,000 units
Equivalent units of production during June
5,200 units
Determine the number of equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out method is used to cost inventories. The completion percentage of 25% applies to both direct materials and conversion costs.
A)575 units
B)200 units
C)1,000 units
D)300 units

Question

Department S had no work in process at the beginning of the period. It added 12,000 units of direct materials during the period at a cost of $84,000; 9,000 units were completed during the period; and 3,000 units were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. Direct labor was $49,500 and factory overhead was $9,900.​
-The following production data were taken from the records of the Finishing Department for June: Inventory in process, June 1, 25% completed
1,500 units
Transferred to finished goods during June
5,000 units
Equivalent units of production during June
5,200 units
Determine the number of equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out method is used to cost inventories. The completion percentage of 25% applies to both direct materials and conversion costs.
A)575 units
B)200 units
C)1,000 units
D)300 units

Quizplus · Accepted Answer

575 unitsUnder the first-in, first-out (FIFO) method, the equivalent units of production for the inventory at the end of the period only include the work done during the current period. The inventory at the beginning of June was 1,500 units, 25% completed, and during June, 5,000 units were completed and transferred out. This means the beginning inventory was completed and an additional 3,500 units were fully processed during June (5,000 units transferred - 1,500 units beginning inventory). The ending inventory in process must be the units started and not completed during June. Since the total equivalent units of production during June are 5,200 units, and we know that 5,000 units were transferred out, the difference of 200 units represents the additional work done on the beginning inventory to complete it. Therefore, the ending inventory work is calculated on the units started and partially completed during June beyond the beginning inventory completion. The calculation for the equivalent units in the ending inventory is as follows: 1,500 units (beginning inventory) were already 25% complete, so they needed 75% more work to complete, which equals 1,125 equivalent units (1,500 units * 75%). Since 5,200 equivalent units were produced during June and 5,000 units were transferred out, this leaves 200 equivalent units of work that were applied to the beginning inventory to complete it. The ending inventory did not receive any work beyond what was needed to complete the beginning inventory, thus the equivalent units for the ending inventory are the work done on the beginning inventory, which is 575 units (1,125 equivalent units to complete the beginning inventory - 550 units already accounted for in the beginning inventory's 25% completion = 575 units).

Department S Had No Work in Process at the Beginning