A company uses the FIFO method for inventory costing. During a period, a production department had 20,000 units in beginning goods in process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending goods in process inventory and are 75% complete. Compute the number of equivalent units produced by the department.
A) 181,500.
B) 165,000.
C) 173,500.
D) 145,000.
E) 187,000.

Question

Quizplus · Accepted Answer

To compute the number of equivalent units produced by the department, we need to account for the partially completed units in beginning and ending goods in process inventory.

Equivalent units = Units completed and transferred + (Ending inventory units x Percentage complete) - (Beginning inventory units x Percentage complete)

Units completed and transferred = 165,000 units

Equivalent units from ending inventory = 22,000 x 75% = 16,500 units

Equivalent units from beginning inventory = 20,000 x 40% = 8,000 units

Total equivalent units = 165,000 + 16,500 - 8,000 = 173,500 units

Therefore, the correct answer is choice C, 173,500.

A Company Uses the FIFO Method for Inventory Costing