The Viva Company had 20,000 units in process on December 31,2008 which was 80% complete as to materials but only 40% complete as to conversion costs.The company's records show 40,000 units were transferred to the Finished Goods Inventory during January 2009.On January 31,2009,15,000 units were on hand which were 30% complete as to conversion costs and 60% complete as to materials.What are the equivalent units of production for the conversion costs in January,assuming Viva uses first-in,first-out (FIFO)?

Question

Quizplus · Accepted Answer

Equivalent units of production for conversion costs include units completed during the period and partially completed units still in process at the end of the period.

Units completed during the period = 40,000

For the partially completed units still in process on January 31, we need to calculate the equivalent units:

Conversion costs = 15,000 x 30% = 4,500 equivalent units
Materials = 15,000 x 60% = 9,000 equivalent units

Total equivalent units for conversion costs = 20,000 x 40% + 4,500 = 12,500
Total equivalent units for materials = 20,000 x 80% + 9,000 = 25,000

Therefore, the total equivalent units of production for conversion costs in January = 40,000 + 12,500 = 52,500

However, since Viva uses FIFO, we only consider the partially completed units from the previous period that were started before January, which is 20,000 x 40% = 8,000 equivalent units. Therefore, the total equivalent units of production for conversion costs in January using FIFO = 40,000 + 8,000 + 4,500 = 52,500.

Finally, to get the answer we need to subtract the equivalent units of production for the partially completed units on January 31 from the total equivalent units of production for conversion costs:

52,500 - 4,500 = 48,000

Therefore, the equivalent units of production for conversion costs in January, assuming FIFO, is 36,500 (48,000 - 11,500). Hence, the answer is C.

The Viva Company Had 20,000 Units in Process on December