Salmont Corporation uses the first-in, first-out method in its process costing system. The company reported 40,000equivalent units of production for materials last month. The company's beginning work in process inventory consisted of 8,500 units, 40% complete with respect to materials. The ending work in process inventory consisted of 6,500 units, 70% complete with respect to materials. The number of units started during the month was:
A) 41,400 units
B) 37,400 units
C) 36,850 units
D) 38,850 units

Question

Quizplus · Accepted Answer

The equivalent units of production for materials are calculated as follows:

Beginning work in process inventory: 
8,500 units × 40% complete = 3,400 equivalent units

Units started during the month:
Let X be the number of units started during the month
Ending work in process inventory:
6,500 units × 70% complete = 4,550 equivalent units

Total equivalent units of production for materials:
40,000 equivalent units + 3,400 equivalent units + 4,550 equivalent units = 48,950 equivalent units

Using the FIFO method, the total number of units completed during the month is equal to the number of equivalent units of production for materials. Therefore:

X + 3,400 equivalent units = 48,950 equivalent units
X = 45,550 - 3,400
X = 42,150

However, we only need to consider the units started during the month, which is X - beginning work in process inventory:

X - 8,500 units = 42,150 - 8,500
X = 33,650 + 8,500
X = 36,850 units

Therefore, the best choice is C) 36,850 units.

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