Suppose that a company adds material at the beginning of production and that conversion costs are incurred evenly throughout production. In May, the beginning work in process inventory was 20% complete and the ending work in process inventory was 30% complete. Under the FIFO method, the number of equivalent units of production for conversion costs for May is equal to the number of units
A) Started in May
B) Started and completed in May plus 30% times the number of units in ending inventory for May
C) Started and completed in May plus 20% times the number of units in beginning inventory plus 30% times the number of units in ending inventory for May
D) Started and completed in May plus 80% times the number of units in beginning inventory plus 30% times the number of units in ending inventory for May

Question

Quizplus · Accepted Answer

Under the FIFO method, equivalent units for conversion costs are calculated by considering the work needed to complete the beginning inventory (80% remaining), the units started and completed during the period, and the work done on the ending inventory (30% complete).

Suppose That a Company Adds Material at the Beginning of Production