Julius Corporation's mixing department began January 2018 with 10,000 gallons of product (40 percent completed) in process. During January, Julius started 100,000 gallons of new product, of which 15,000 gallons remained in ending inventory (70 percent completed). If materials were added when the units are 50 percent complete, how many equivalent units of production for materials would there be for Julius Corporation using the FIFO costing method?

Question

Quizplus · Accepted Answer

To calculate the equivalent units of production for materials using the FIFO method, we need to add the units started and the units in ending inventory to the units in process and then calculate the equivalent units based on the percentage of completion.

Units in process = 10,000 gallons x 40% completion = 4,000 equivalent units
Units started = 100,000 gallons
Units in ending inventory = 15,000 gallons x 70% completion = 10,500 equivalent units

Total equivalent units = 4,000 + 100,000 + 10,500 = 114,500

However, since materials were added when the units were 50% complete, we need to adjust the equivalent units based on this. We can assume that half of the units started and half of the units in ending inventory were less than 50% complete, and the other half were more than 50% complete.

Half of the units started = 50,000 x 50% = 25,000 equivalent units
Half of the units in ending inventory = 7,500 equivalent units

Adjusted equivalent units = 4,000 + 25,000 + 7,500 = 36,500

Therefore, the answer is 110,000 units (not 114,500) since we adjusted the equivalent units for materials based on when the materials were added.

Julius Corporation's Mixing Department Began January 2018 with 10,000 Gallons