(Appendix 4A)Herston Company uses the FIFO method in its process costing system.The beginning work-in-process inventory in a particular department consisted of 6,000 units,two-thirds complete with respect to conversion costs.During the month,42,000 units were started and 40,000 units were completed and transferred out of the department.The company had 40,000 equivalent units of production for conversion costs.Which of the following represents the ending work-in-process inventory in the department?
A) 8,000 units,25% complete with respect to conversion costs.
B) 0 units.
C) 8,000 units,50% complete with respect to conversion costs.
D) 4,000 units,100% complete with respect to conversion costs.

Question

Quizplus · Accepted Answer

To determine the ending work-in-process inventory, we need to find the equivalent units of production for conversion costs of the units that were started but not completed during the month.

Equivalent units of production for conversion costs:
Beginning work-in-process inventory: (2/3) x 6,000 = 4,000
Units started and completed during the month: 40,000
Ending work-in-process inventory: 42,000 - 40,000 = 2,000
Equivalent units of production for ending work-in-process inventory: 2,000 x 50% = 1,000

Total equivalent units of production for conversion costs: 4,000 + 40,000 + 1,000 = 45,000

Therefore, the ending work-in-process inventory in the department is 8,000 units, 50% complete with respect to conversion costs (since 45,000 - 40,000 = 5,000 units were started but only 1,000 units were completed). 
The answer is C.

(Appendix 4A)Herston Company Uses the FIFO Method in Its Process