Tiny Tots Inc. started the period with an opening Work-in-Progress (WIP) Inventory of 1,400 units that were 100% complete with regard to Direct Materials (DM) and 40% complete with regard to Conversion Costs (CC). During the period, they started 6,600 new units, and they had completed and removed 6,000 units from WIP inventory. 2,000 units in ending inventory were 100% complete with respect to Direct Materials and 60% complete with respect to Conversion Costs. What will the total equivalent units of Direct Materials be if the First-In, First-Out (FIFO) method is used, and what would be the answer if the Weighted-Average method is used?
A) 6,000 for FIFO and 8,000 for Weighted-Average
B) 6,600 for FIFO and 8,000 for Weighted-Average
C) 8,000 for FIFO and 6,000 for Weighted-Average
D) 8,000 for FIFO and 6,600 for Weighted-Average

Question

Quizplus · Accepted Answer

According to FIFO, Total Equivalent Units of Direct Materials = (Units in Beginning WIP Inventory × Percentage of Resource Added this Period) + (Units Started and Completed this Period × Percentage of Resource Added this Period) + (Units in Ending WIP Inventory × Percentage of Resource Added this Period)
= (1,400 units × 0%) + (4,600 units × 100%) + (2,000 units × 100%)
= 0 + 4,600 units + 2,000 units
= 6,600 units
According to Weighted-Average method, Total Equivalent Units of Direct Materials = (Units Completed and Removed from WIP Inventory × Percentage of Resource Added to Date) + (Units in Ending WIP Inventory × Percentage of Resource Added to Date)
= (6,000 units × 100%) + (2,000 units × 100%)
= 6,000 units + 2,000 units
= 8,000 units