The management for Zero Corp. has asked their cost accountant Alec to compile some data about their process costing. Zero Corp. is a regional factory that manufactures peach-scented soy candles that are sold in glass mason jars. During their most recent year, Zero started 49,600 candles and completed a total of 37,450 by the end of the year. They began the year with 3,480 candles in their Work-in-Progress (WIP) Inventory, about 28% incomplete, and their ending WIP Inventory units are 19% incomplete overall. Zero adds both Conversion Costs (CC) and Direct Material (DM) resources evenly throughout the process. Alec has decided to use First-In, First-Out (FIFO) for their process costing and has determined their equivalent units to be (Round your final answer to the nearest whole unit.)
A) 37,914 units
B) 47,605 units
C) 49,136 units
D) 50,110 units

Question

Quizplus · Accepted Answer

This question requires the determination of equivalent units using the FIFO method. It should be noted that the question presents units for beginning and ending units in terms of what is incomplete versus what has been completed, so this will need to be factored in as well. First, determine how many units to account for, and that includes adding the beginning WIP inventory of 3,480 to the units started during the period of 49,600 for a total of 53,080. Next, subtract the number of units completed and removed, 37,450, to arrive at an ending inventory of 15,630 units. The equivalent units under the FIFO method will be equal to the beginning units times their percentage of completion (3,480 × 28%) plus units started and completed times their percentage of completion ((49,600 - 15,630) × 100%) plus the units in ending inventory times their percentage of completion (15,630 × 81%). 974.40 + 33,970 + 12,660.30 = 47,605 units.

The Management for Zero Corp