Equivalent units of production for a process costing system using the first-in, first-out method are equal to:
A) Units completed during the period + Equivalent units in the ending work in process inventory.
B) Units transferred out + Equivalent units in ending work in process inventory + Equivalent units in beginning work in process inventory.
C) Units started and completed during the period + Equivalent units in the ending work in process inventory.
D) Units completed during the period and transferred out.

Question

Quizplus · Accepted Answer

The first-in, first-out method assumes that the first units that entered the process are the first ones to be completed and transferred out. Therefore, the equivalent units of production include not only the units completed during the period and transferred out but also the work that was done on the units in the beginning work in process inventory and the work that remains in the ending work in process inventory. So, the equivalent units are calculated as follows: Units transferred out + Equivalent units in ending work in process inventory + Equivalent units in beginning work in process inventory.

Equivalent Units of Production for a Process Costing System Using