Department e had 4,000 units in work in process that were 40% completed at the beginning of the period at a cost of $12,500. during the period, 14,000 units of direct materials were added at a cost of $28,700, and 15,000 units were completed. at the end of the period, 3,000 units were 75% completed. all materials are added at the beginning of the process. direct labor was $32,450 and factory overhead was $18,710. the number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories was

The answer is 18,000.

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The question is incomplete. The complete question is as follows:

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710. The number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories was:

a. 15,650

b. 14,850

c. 14,150

d. 14,650

The answer is: a

Explanation:

There are two ways of calculating the value of work in process (WIP) inventory (inventory that has not been fully converted to finished goods). The first is the weighted average method which allocates cost per unit of production based on the average inventory value (there is no distinction in costing between opening WIP and current period units) . The second is the first in first out (FIFO) method which assumes that the opening work in process inventory is the first to be completely processed to finished goods in the current period. Therefore, the cost per unit of opening WIP is calculated separately from the cost of goods that are started in the current period (in the calculation below, the opening WIP units are deducted from current period units). Therefore, the cost of total units completed in the current period are matched only with the units produced in the current period. The units in closing inventory comprise solely of the current period units and the units in opening inventory are counted separately.

The equivalent units of production are calculated as follows:

Element      Completed units       Closing WIP  Total Equivalent

DM*         5, 000 - 4, 000 = 11,000       3,000               14,000

CC*         15,000 - 1,600   = 13,400       2,250               15,650

Opening WIP:

4,000 = 4,000 units * 100% (materials are added at the beginning of the process so the process is 100% complete)

1, 600 = 4,000 units * 40% ( 40% of conversion costs were incurred with respect to production progress)

Closing WIP:

3,000 = 3,000 units * 100% (materials are added at the beginning of the process so the process is 100% complete)

2,250 = 3,000 units * 75% (75 % of conversion costs were incurred with respect to production progress)

Total equivalent units for the period for materials: 14, 000 units

Total equivalent units for the period for conversion: 15, 650 units

DM = Direct Materials

CC = Conversion Costs (Labour and Factory Overhead)          

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