The information below was obtained from the records of one of the departments of Cushing Corporation for the month of August. The company uses the first-in, first-out method in its process costing system. All materials are added at the beginning of the process.The equivalent units for labor and overhead for the month of August are:
A) 85,000 units
B) 95,000 units
C) 87,500 units
D) 82,500 units

Question

The information below was obtained from the records of one of the departments of Cushing Corporation for the month of August. The company uses the first-in, first-out method in its process costing system.  All materials are added at the beginning of the process.The equivalent units for labor and overhead for the month of August are:
A) 85,000 units 
B) 95,000 units 
C) 87,500 units 
D) 82,500 units

Quizplus · Accepted Answer

The equivalent units for labor and overhead are calculated by adding the number of units completed during the month (80,000) and the equivalent units in the ending work in process inventory (5,000). This gives a total of 85,000 equivalent units. However, since the company uses the FIFO method, only the units in the beginning work in process inventory are considered to be fully completed during the month. The equivalent units for labor and overhead are therefore 80,000 (completed during the month) plus 2,500 (equivalent units for beginning work in process inventory) which equals 82,500. Therefore, the best choice is D.

The Information Below Was Obtained from the Records of One