Reference: 04-12
GK Manufacturing had inventory at May 1 of 5,000 units which were 70% complete as to conversion costs. The
May 1 inventory had total costs of $ 69,900 which included $ 21,500 direct materials, $ 38,775 direct labour and
$ 9,625 factory overhead.
Costs added to work in process in May were as follows: $$\begin{array} { | l | l | }
\hline \text { Direct materials } & \$ 298,800 \
\hline \text { Direct labour } & \$ 540,800 \
\hline \text { Factory overhead } & \$ 135,400 \
\hline
\end{array}$$ During May, 49,200 units were completed, including those in inventory on May 1. On May 30, the inventory of work in process consisted of 5,600 units which were 3/8 completed as to conversion costs. Inventories are costed by the first-in, first-out method and all materials are added at the beginning of the process.
-What were the equivalent units of production for conversion costs for May
A)49,200 units.
B)46,300 units.
C)52,800 units.
D)47,800 units.

Question

Reference: 04-12
GK Manufacturing had inventory at May 1 of 5,000 units which were 70% complete as to conversion costs. The
May 1 inventory had total costs of $ 69,900 which included $ 21,500 direct materials, $ 38,775 direct labour and
$ 9,625 factory overhead.
Costs added to work in process in May were as follows: $$\begin{array} { | l | l | } 
\hline \text { Direct materials } & \$ 298,800 \
\hline \text { Direct labour } & \$ 540,800 \
\hline \text { Factory overhead } & \$ 135,400 \
\hline
\end{array}$$ During May, 49,200 units were completed, including those in inventory on May 1. On May 30, the inventory of work in process consisted of 5,600 units which were 3/8 completed as to conversion costs. Inventories are costed by the first-in, first-out method and all materials are added at the beginning of the process.
-What were the equivalent units of production for conversion costs for May
A)49,200 units.
B)46,300 units.
C)52,800 units.
D)47,800 units.

Quizplus · Accepted Answer

Equivalent units of production for conversion costs are calculated by adding the units completed to the equivalent units in ending inventory for conversion costs. Since all materials are added at the beginning, they are not considered in the calculation of equivalent units for conversion costs.1. Units completed in May: 49,200 units. These are 100% complete as to conversion costs.2. Ending inventory: 5,600 units at 3/8 (or 37.5%) completion for conversion costs.    Equivalent units for conversion costs in ending inventory = 5,600 units * 37.5% = 2,100 units.3. Units from beginning inventory were completed in May, so they are not directly added to the calculation since they are part of the units completed.Therefore, equivalent units for conversion costs = Units completed + Equivalent units in ending inventory = 49,200 units + 2,100 units = 51,300 units.However, since 51,300 units is not an option and considering the FIFO method, we need to adjust for the completion of the beginning inventory:Beginning inventory was 5,000 units at 70% complete. To finish these units, they needed 30% more conversion costs. So, for the FIFO method, we only consider the work needed to complete the beginning inventory and the work done on new units.Adjustment for beginning inventory: 5,000 units * 30% = 1,500 units.Adding the new units started and completed in May: 49,200 units (completed in May) - 5,000 units (from beginning inventory) = 44,200 units.Total equivalent units for conversion costs under FIFO = 44,200 units (new units fully completed) + 1,500 units (to complete beginning inventory) + 2,100 units (ending inventory) = 47,800 units.

Reference: 04-12 GK Manufacturing Had Inventory at May 1 of 5,000

Reference: 04-12
GK Manufacturing Had Inventory at May 1 of 5,000