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.(A) 68, 400 materials: 66, 800 conversion.(B) 58, 400 materials: 56, 800 conversion.

Answer 1

Answer:

The correct option is (A)

Explanation:

Provided information,

We have

Opening Units = 10,000

Complete in respect of

Materials = 10,000 $\times$ 30% = 3,000

Conversion cost = 10,000 $\times$ 10% = 1,000

Since FIFO method is followed, these units will be completed first

Therefore, from opening number of equivalent units completed at the end of current period

Material = 10,000

Conversion = 10,000

Newly added units:

60,000 units from which with opening 62,000 are transferred to next department.

Clearly 62,000 - 10,000 = 52,000 Completed during the period

Closing units = 8,000

Material = 8,000 $\times$ 80% = 6,400

Conversion = 8,000 $\times$ 60% = 4,800

Thus, Total Equivalent Units

Material = 10,000 + 52,000 + 6,400 = 68,400

Conversion = 10,000 + 52,000 + 4,800 = 66,800

The correct option is (A)