Happy Trails,Inc.manufactures railway coaches and uses the FIFO method of process costing to record costs.The Work-in-Process Inventory of the Heating Department on October 1 was 74% complete for materials and 23% complete for conversion costs.On October 31,its ending Work-in-Process Inventory was 84% complete for materials and 41% complete for conversion costs.This means that for the ending inventory,________% of the materials and ________% of the conversion costs were added during October.
A) 74; 41
B) 26; 23
C) 84; 41
D) 41; 84

Question

Quizplus · Accepted Answer

The FIFO method of process costing assumes that the units in the ending inventory are those that were last added during the month. Therefore, the percentage of materials and conversion costs added during October can be calculated as follows:

Materials: 
Ending inventory = 84% complete
Beginning inventory = 74% complete
Units started and completed during October = 100% complete
Percentage of materials added during October = Ending inventory - Beginning inventory = 84% - 74% = 10%

Conversion costs: 
Ending inventory = 41% complete
Beginning inventory = 23% complete
Units started and completed during October = 100% complete
Percentage of conversion costs added during October = Ending inventory - Beginning inventory = 41% - 23% = 18%

Therefore, the correct answer is C) 84; 41.