Reference: 04-12
GK Manufacturing had inventory at May 1 of 5,000 units which were 70% complete as to conversion costs. The
May 1 inventory had total costs of $ 69,900 which included $ 21,500 direct materials, $ 38,775 direct labour and
$ 9,625 factory overhead.
Costs added to work in process in May were as follows: $$\begin{array} { | l | l | }
\hline \text { Direct materials } & \$ 298,800 \
\hline \text { Direct labour } & \$ 540,800 \
\hline \text { Factory overhead } & \$ 135,400 \
\hline
\end{array}$$ During May, 49,200 units were completed, including those in inventory on May 1. On May 30, the inventory of work in process consisted of 5,600 units which were 3/8 completed as to conversion costs. Inventories are costed by the first-in, first-out method and all materials are added at the beginning of the process.
-What were the equivalent units of production for material costs for May
A)49,200 units.
B)49,800 units.
C)47,800 units.
D)46,300 units.

Question

Reference: 04-12
GK Manufacturing had inventory at May 1 of 5,000 units which were 70% complete as to conversion costs. The
May 1 inventory had total costs of $ 69,900 which included $ 21,500 direct materials, $ 38,775 direct labour and
$ 9,625 factory overhead.
Costs added to work in process in May were as follows: $$\begin{array} { | l | l | } 
\hline \text { Direct materials } & \$ 298,800 \
\hline \text { Direct labour } & \$ 540,800 \
\hline \text { Factory overhead } & \$ 135,400 \
\hline
\end{array}$$ During May, 49,200 units were completed, including those in inventory on May 1. On May 30, the inventory of work in process consisted of 5,600 units which were 3/8 completed as to conversion costs. Inventories are costed by the first-in, first-out method and all materials are added at the beginning of the process.
-What were the equivalent units of production for material costs for May
A)49,200 units.
B)49,800 units.
C)47,800 units.
D)46,300 units.

Quizplus · Accepted Answer

Equivalent units for material costs under the FIFO method consider all materials added at the beginning of the process. Since all materials are added at the beginning, the equivalent units for materials would be the total units completed (49,200) plus the units in ending inventory (5,600), totaling 54,800 units. However, since the question specifically asks for the equivalent units of production for material costs for May, and considering the FIFO method, we only count the materials added for the units processed during May. Given that materials are added at the beginning, the units completed in May plus the units still in process at the end of May (which had materials added at the beginning of their processing) would be considered. However, the initial inventory units (5,000) had their materials added before May, so they are not counted again for May's material costs. Therefore, the correct calculation should only consider the new units started and completed in May plus the ending inventory, without adding the beginning inventory units again. Since the beginning inventory is already 100% complete concerning material (as materials are added at the beginning), and all units started and completed in May or in ending inventory would have materials added in May, the calculation error in the explanation led to an incorrect conclusion. The correct answer should reflect the calculation of equivalent units for materials considering only the new units processed during May, but the provided explanation and answer choice mistakenly included an incorrect calculation approach. The correct equivalent units for material costs should be calculated based on the units completed and in process that were started during May, without double-counting the beginning inventory for material costs.

Reference: 04-12 GK Manufacturing Had Inventory at May 1 of 5,000

Reference: 04-12
GK Manufacturing Had Inventory at May 1 of 5,000