Sparky Corporation uses the FIFO method of process costing. The following information is available for February in its Molding Department: Units:
Beginning Inventory: 25,000 units, 100% complete as to materials and 55% complete as to conversion.
Units started and completed: 110,000.
Units completed and transferred out: 135,000.
Ending Inventory: 30,000 units, 100% complete as to materials and 30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $43,000. Costs in beginning Work in Process - Conversion: $48,850.
Costs incurred in February - Direct Materials: $287,000. Costs incurred in February - Conversion: $599,150.
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Calculate the equivalent units of conversion.
A) 144,000
B) 110,000
C) 140,000
D) 130,250
E) 165,000

Question

Quizplus · Accepted Answer

Equivalent units of conversion refer to the number of units that have been completed as well as the portion of in-process units that are nearing completion in terms of conversion costs. Therefore, the equivalent units of conversion can be calculated as follows:

Equivalent units of conversion = Units completed and transferred out + (Ending inventory units × percentage complete as to conversion)
Equivalent units of conversion = 135,000 + (30,000 × 30%)
Equivalent units of conversion = 135,000 + 9,000
Equivalent units of conversion = 144,000

Therefore, the correct answer is D) 130,250.

Sparky Corporation Uses the FIFO Method of Process Costing