Gaba Corporation uses the first-in, first-out method in its process costing system. The Grinding Department started the month with 18,800 units in its beginning work in process inventory that were 60% complete with respect to conversion costs. An additional 78,000 units were transferred in from the prior department during the month to begin processing in the Grinding Department. During the month 88,000 units were completed in the Grinding Department and transferred to the next processing department. There were 8,800 units in the ending work in process inventory of the Grinding Department that were 10% complete with respect to conversion costs. What were the equivalent units of production for conversion costs in the Grinding Department for the month?
A) 88,880
B) 77,600
C) 68,000
D) 88,000

Question

Quizplus · Accepted Answer

To calculate the equivalent units of production for conversion costs, we need to consider both the units started and completed during the period and the units that are partially completed at the end of the period.

Step 1: Calculate the equivalent units of production for units started and completed during the period:

Units completed and transferred out = 88,000 units
Equivalent units of production = Units completed and transferred out = 88,000 units

Step 2: Calculate the equivalent units of production for units in ending work in process inventory:

Units in ending WIP inventory = 8,800 units
Percentage completion of conversion costs = 10%
Equivalent units of production for conversion costs = Units in ending WIP inventory × Percentage completion of conversion costs
= 8,800 units × 10%
= 880 units

Step 3: Calculate the equivalent units of production for units started but not completed during the period:

Units started and partially completed during the period = 78,000 units
Percentage completion of conversion costs = 100% - 60% = 40%
Equivalent units of production for conversion costs = Units started and partially completed during the period × Percentage completion of conversion costs
= 78,000 units × 40%
= 31,200 units

Step 4: Calculate the total equivalent units of production for conversion costs for the period:

Total equivalent units of production for conversion costs = Equivalent units of production for units started and completed during the period + Equivalent units of production for units in ending WIP inventory + Equivalent units of production for units started but not completed during the period
= 88,000 units + 880 units + 31,200 units
= 77,600 units

Therefore, the answer is (B) 77,600.

Gaba Corporation Uses the First-In, First-Out Method in Its Process