Sparky Corporation uses the FIFO method of process costing.The following information is available for February in its Molding Department: Units:
Beginning Inventory: 25,000 units,100% complete as to materials and 55% complete as to conversion.
Units started and completed: 110,000.
Units completed and transferred out: 135,000.
Ending Inventory: 30,000 units,100% complete as to materials and 30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $43,000.
Costs in beginning Work in Process - Conversion: $48,850.
Costs incurred in February - Direct Materials: $287,000.
Costs incurred in February - Conversion: $599,150.
-Calculate the equivalent units of materials.
A)165,000
B)144,000
C)140,000
D)130,250
E)110,000

Question

Quizplus · Accepted Answer

Equivalent units of materials = Units completed and transferred out + Ending inventory in units x Percentage complete as to materials = 135,000 + 30,000 x 100% = 165,000 units. However, since we are using FIFO, the ending inventory consists of units started in February, which means they are not included in the equivalent units calculation. Therefore, we only consider the beginning inventory and the units started and completed in February: Equivalent units of materials = Beginning inventory in units x Percentage complete as to materials + Units started and completed x Percentage complete as to materials = 25,000 x 100% + 110,000 x 100% = 140,000 units. Therefore, the correct choice is C.

Sparky Corporation Uses the FIFO Method of Process Costing