Assume there were 6,000 units in beginning work in process, 60% complete. 20,000 units were completed during the month. Ending work in process is 40% complete, which is equivalent to 3,200 units for conversion costs. Materials are added at the beginning of the process. The standard cost method is used. Assume that conversion costs are $122,100 for the month, and the equivalent unit cost for conversion is $5.50. The ending work in process is 80% complete, and the beginning work in process consisted of 2,000 units, 40% complete. The company completed 17,000 units. What is the number of whole units in the ending work in process under the FIFO method?
A) 6,000 units
B) 6,500 units
C) 7,500 units
D) 5,200 units

Question

Quizplus · Accepted Answer

Under FIFO (first in, first out) method, we assume that the units in beginning work in process are completed first before starting on the units in ending work in process.

Step 1: Calculate equivalent units for each category.

Conversion costs: 
Units completed during the month = 20,000 units 
Ending work in process (40% complete) = 3,200 units * 0.40 = 1,280 units 
Total equivalent units for conversion costs = 20,000 + 1,280 = 21,280 units

Materials: 
Beginning work in process (60% complete) = 6,000 * 0.60 = 3,600 units 
Units added during the month (100% complete) = 20,000 units 
Ending work in process (40% complete) = 3,200 units * 0.40 = 1,280 units 
Total equivalent units for materials = 3,600 + 20,000 + 1,280 = 24,880 units

Step 2: Calculate cost per equivalent unit for conversion costs.

Cost for conversion costs = $122,100 
Equivalent units for conversion costs = 21,280 units 
Cost per equivalent unit for conversion costs = $122,100 / 21,280 units = $5.75 per unit

Step 3: Calculate the cost of units completed and in ending work in process.

Units completed during the month = 20,000 units 
Cost per unit for conversion costs = $5.75 
Cost for units completed = 20,000 units * $5.75 per unit = $115,000

Ending work in process (80% complete) = 3,200 units * 0.80 = 2,560 units 
Cost per unit for conversion costs = $5.75 
Cost for ending work in process = 2,560 units * $5.75 per unit = $14,720

Step 4: Calculate the total cost of units in beginning work in process and ending work in process.

Beginning work in process (2,000 units * 40% complete) = 800 equivalent units 
Cost per unit for conversion costs = $5.50 
Cost for beginning work in process = 800 units * $5.50 per unit = $4,400

Total cost of units in ending work in process = $14,720 
Total cost of beginning and ending work in process = $4,400 + $14,720 = $19,120

Step 5: Calculate the number of units in ending work in process.

Total cost of ending work in process = $14,720 
Cost per unit for conversion costs = $5.75 per unit 
Number of units in ending work in process = $14,720 / $5.75 per unit = 2,560 units

Therefore, the number of whole units in the ending work in process under the FIFO method is 2,560 units, which is answer choice C.

Assume There Were 6,000 Units in Beginning Work in Process