Figure 5-11
Gill Ltd. adds raw materials to production at the beginning of the process in the Assembly Department. Materials data for this department for March 2004 are as follows:
$\begin{array}{lrrr}
&&\text { Costs }\
&\text { Units } & \text { Materials } & \text { Conversion } \
\text { Work in progress, March 1 } & 25,000 & £ 68,750 & £ 167,650 \
\text { Started during March } & 100,000 & 300,000 & 903,350 \
\text { Work in nrogress March } 31 & 10000 & &
\end{array}$ Beginning inventory was 70 per cent complete. Ending inventory was 40 per cent complete.
-Refer to Figure 5-11. How many equivalent units for conversion costs would there be for Gill Ltd. in March using the FIFO method?

Question

Figure 5-11
Gill Ltd. adds raw materials to production at the beginning of the process in the Assembly Department. Materials data for this department for March 2004 are as follows: 
$\begin{array}{lrrr}
&&\text { Costs }\
&\text { Units } & \text { Materials } & \text { Conversion } \
\text { Work in progress, March 1 } & 25,000 & £ 68,750 & £ 167,650 \
\text { Started during March } & 100,000 & 300,000 & 903,350 \
\text { Work in nrogress March } 31 & 10000 & &
\end{array}$ Beginning inventory was 70 per cent complete. Ending inventory was 40 per cent complete.
-Refer to Figure 5-11. How many equivalent units for conversion costs would there be for Gill Ltd. in March using the FIFO method?

Quizplus · Accepted Answer

To calculate the equivalent units using the FIFO method, we need to first calculate the equivalent units for the units completed and transferred out and then for the ending inventory.

Units completed and transferred out = (Units started and completed - Ending inventory in process) + Beginning inventory in process
Units started and completed = 80,000
Ending inventory in process = 20,000 * 40% = 8,000
Beginning inventory in process = 70% * 10,000 = 7,000
Units completed and transferred out = (80,000 - 8,000) + 7,000 = 79,000

Equivalent units for conversion costs for units completed and transferred out = Units completed and transferred out * Conversion costs percentage
Conversion costs percentage = 100% - Direct materials percentage = 100% - 60% = 40%
Equivalent units for conversion costs for units completed and transferred out = 79,000 * 40% = 31,600

Equivalent units for conversion costs for ending inventory = Ending inventory in process * Conversion costs percentage
Equivalent units for conversion costs for ending inventory = 8,000 * 40% = 3,200

Total equivalent units for conversion costs = Equivalent units for conversion costs for units completed and transferred out + Equivalent units for conversion costs for ending inventory
Total equivalent units for conversion costs = 31,600 + 3,200 = 34,800

Therefore, the answer is D) 101,500 units.

Figure 5-11 Gill Ltd Beginning Inventory Was 70 Per Cent Complete

Figure 5-11
Gill Ltd Beginning Inventory Was 70 Per Cent Complete