Chicotti Company has 6,000 units in beginning work in process, 30% complete as to conversion costs, 75,000 units transferred out to finished goods, and 2,000 units in ending work in process 20% complete as to conversion costs. The beginning and ending inventory is fully complete as to materials costs. How much are equivalent units for conversion costs if the FIFO method is used?
A) 75,400
B) 79,600
C) 71,000
D) 73,600

Question

Quizplus · Accepted Answer

To calculate the equivalent units for conversion costs using the FIFO method, we need to separate the beginning work in process (BWIP) units from the units started and completed during the current period. Then we need to calculate equivalent units for both BWIP and current period units separately, and add them up to get the total equivalent units.

First, let's calculate the equivalent units for BWIP:
6,000 units x 30% complete = 1,800 equivalent units

Next, let's calculate the equivalent units for current period units. Since we are using the FIFO method, we assume that the units started and completed first are transferred out first. Therefore, the units in ending work in process (EWIP) are the ones started last and are only partially complete.

To calculate the equivalent units for current period units, we need to calculate the units started and completed during the period (which equals the units transferred out), and add the units in EWIP multiplied by their percentage of completion.

Units started and completed = Units transferred out = 75,000 units
Units in EWIP = 2,000 units x 20% complete = 400 equivalent units

Total equivalent units for conversion costs = BWIP equivalent units + current period equivalent units
Total equivalent units = 1,800 + 75,400 = 73,600

Therefore, the answer is D.

Chicotti Company Has 6,000 Units in Beginning Work in Process