Question

At the beginning of the month, the Forming Department of Martin Manufacturing had 10,000 units in inventory, 30% complete as to materials, and 10% complete as to conversion. During the month the department started 60,000 units and transferred 62,000 units to the next manufacturing department. At the end of the month, the department had 8,000 units in inventory, 80% complete as to materials and 60% complete as to conversion. If Martin Manufacturing uses the FIFO method of process costing, compute the equivalent units for materials and conversion respectively for the Forming Department.

Answer 1

Answer:

Equivalent units for material = 7,000 + 52,000 - 6,400 = 52,600

Equivalent units for conversion = 9,000 + 52,000 - 4,800 = 56,200

Explanation:

As per FIFO that is First In First Out

therefore if 62,000 units are transferred first opening stock will be transferred, that is 10,000 units fully completed and then transferred.

Then remaining will be from introduced 60,000 units, out of which 52,000, units that is 62,000 - 10,000 will be used.

Which means only 8,000 out of 60,000 units are left which is 80% complete in respect to materials and 60% complete with respect to conversion

Opening was 30% complete to materials that is 70% completed in this period

Equivalent = 10,000 $\times$ 70% = 7,000

In respect of conversion 10% complete and 90% in this period = 10,000  $\times$ 90% = 9,000

Also 52,000 fully completed 100% in both respects.

For finished goods

In respect of material = 8,000  $\times$ 80% = 6,400

In respect to conversion = 8,000  $\times$ 60% = 4,800

Equivalent units for material = 7,000 + 52,000 - 6,400 = 52,600

Equivalent units for conversion = 9,000 + 52,000 - 4,800 = 56,200