ABC Company produces a single product. Material A is added at the start of the p
ID: 2469382 • Letter: A
Question
ABC Company produces a single product. Material A is added at the start of the production process and packaging material B is added at the end of the process. Conversion costs are incurred uniformly throughout the process. Inspection takes place when manufacturing is completed, but before packaging Material B is added. Normal spoilage for this production process is 5% of good output. Spoiled units are discarded. Production data for this year was as follows:
Beginning work-in-process inventory (20% complete) 2,000 units
Units started 18,000 units
Good units completed and sold 16,000 units
Ending work-in-process inventory (40% complete) 1,000 units
What are equivalent units for Material A, Material B, and Conversion costs? (Use FIFO process costing to find equivalent units for Material A, Material B and Conversion Cost) Show work, please. Thank you.
1) In FIFO, the equivalent units for Material A are?
2) In FIFO, the equivalent units for Material B are?
3) In FIFO, the equivalent units for Conversion cost are?
Explanation / Answer
1. Completed units on which Material A would have been applied = 16,000 x 105% = 16,800 units
Equivalent Units for material A = 16,800 + 1,000 = 17,800 units
2. Equivalent Units for Material B = 16,000 + 1,000 = 17,000 units
3. Equivalent Units for Conversion Cost = (2,000 x 80%) + (14,000 x 100%) + (1,000 x 40%) = 16,000 units