A company uses the FIFO method for inventory costing. At the beginning of a period, the production department had 20,000 units in beginning Work in Process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 75% complete. Compute the number of equivalent units produced by the department.
A) 165,000.
B) 173,500.
C) 187,000.
D) 145,000.
E) 181,500.

Question

Quizplus · Accepted Answer

To compute the number of equivalent units produced by the department, we need to take into account the units that are partially completed in the beginning and the ending work in process inventories.

First, we need to calculate the equivalent units of production for the beginning work in process inventory:

20,000 units x 40% completion = 8,000 equivalent units

Then, we need to calculate the equivalent units of production for the units completed and transferred:

165,000 units x 100% completion = 165,000 equivalent units

Finally, we need to calculate the equivalent units of production for the ending work in process inventory:

22,000 units x 75% completion = 16,500 equivalent units

The total equivalent units of production are:

8,000 (beginning WIP) + 165,000 (completed and transferred) + 16,500 (ending WIP) = 173,500 equivalent units

Therefore, the best choice is B) 173,500.

A Company Uses the FIFO Method for Inventory Costing