Solis Company uses the FIFO method to compute equivalent units. It has 4,000 units in beginning work in process, 20% complete as to conversion costs and 50% complete as to materials costs, 66,000 units started, and 6,000 units in ending work in process, 30% complete as to conversion costs, and 80% complete as to materials cost. How much are the equivalent units for materials under the FIFO method?
A) 66,800
B) 66,000
C) 68,800
D) 70,000

Question

Quizplus · Accepted Answer

Under the FIFO method, equivalent units for materials are calculated by adding the units completed and transferred out during the period to the equivalent units in ending work in process inventory. The beginning inventory is not considered because it relates to the work done in the previous period. - Units started and completed during the period = 66,000 units started - 6,000 units in ending work in process = 60,000 units.- Equivalent units in ending work in process for materials = 6,000 units * 80% = 4,800 units.- Total equivalent units for materials = Units completed + Equivalent units in ending work in process = 60,000 + 4,800 = 64,800 units.However, the correct calculation should consider the completion of beginning inventory and any additional work done on units from the beginning inventory:- Completion of beginning inventory for materials = 4,000 units * (100% - 50%) = 2,000 units.- Therefore, the correct total equivalent units for materials = 64,800 units (completed and ending WIP) + 2,000 units (completion of beginning inventory) = 66,800 units.

Solis Company Uses the FIFO Method to Compute Equivalent Units