Question

Department M had 2,000 units 59% completed in process at the beginning of June, 11,400 units completed during June, and 900 units 30% completed at the end of June. What was the number of equivalent units of production for conversion costs for June if the first-in, first-out method is used to cost inventories?

Answer 1

Answer:

Total equivalent units= 10,490

Explanation:

Equivalent Units

To apportion cost between work in progress and completed units in a particular period, we use equivalent units. Equivalents units are notional whole units which represent incomplete work and are used to apportion cost between completed units and work in progress

Equivalent Units = Degree of Completion × Units of inventory

Under the first in first out(FIFO) method, to account for the units of work completed the opening inventory are separated and distinguished from the units newly introduced in the period.

Another principle under this method is that only the percentage of work yet to be completed on the units of opening are done in the current period

Fully worked = 11,400 -2000 = 9400

The fully worked represents units of inventory started this current period and completed in the same period.

It implies that out of 11,400 completed in the period 2,000 units represent the opening inventory carried forward and the balance is fully worked

Item                                       working             Equivalent units

Opening inventory         (100-59)%×  2000  =   820

Fully worked                    100% ×  9400     =     9400

Closing inventory              30% × 900      =       270

Total equivalent units                                     10490