A company uses the FIFO method for inventory costing.At the beginning of a period,the production department had 20,000 units in beginning Work 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 Work 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 equivalent units produced by the department, we need to first calculate the equivalent units for the beginning Work in Process inventory and the units completed and transferred out during the period.

Equivalent units for beginning Work in Process inventory = 20,000 x 40% = 8,000 units 
Equivalent units for units completed and transferred out = 165,000 units

Now we need to calculate the equivalent units for the ending Work in Process inventory. Since the ending inventory is 75% complete, we need to calculate the equivalent units for the 22,000 units assuming they are 75% complete.

Equivalent units for ending Work in Process inventory = 22,000 x 75% = 16,500 units

The total equivalent units produced by the department is the sum of the equivalent units for the beginning inventory, units completed and transferred out, and ending inventory:

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

Therefore, the best choice is C) 173,500.

A Company Uses the FIFO Method for Inventory Costing