Herston Company uses the FIFO method in its process costing system.The beginning work-in-process inventory in a particular department consisted of 6,000 units,two-thirds complete with respect to conversion costs.During the month,42,000 units were started and 40,000 units were completed and transferred out of the department.The company had 40,000 equivalent units of production for conversion costs.Which of the following represents the ending work-in-process inventory in the department? (Do not round intermediate calculations.)
A) 8,000 units, 25% complete with respect to conversion costs.
B) 0 units.
C) 8,000 units, 50% complete with respect to conversion costs.
D) 4,000 units, 100% complete with respect to conversion costs.

Question

Quizplus · Accepted Answer

The total equivalent units of production for conversion costs is calculated as follows:

Equivalent units of production for beginning WIP inventory = 6,000 x 2/3 = 4,000 units
Equivalent units of production for units started and completed = 40,000 units
Equivalent units of production for ending WIP inventory = ?

Total equivalent units of production for conversion costs = 4,000 + 40,000 + ? = 40,000 units

Therefore, the equivalent units of production for ending WIP inventory is:

40,000 - (4,000 + 40,000) = 8,000 units

Since the ending WIP inventory is 50% complete with respect to conversion costs, the answer is C) 8,000 units, 50% complete with respect to conversion costs.

Herston Company Uses the FIFO Method in Its Process Costing