Billings Corporation uses the first-in, first-out method in its process costing system. On July 1, Department A had 10,000 units in process that were 80% complete with respect to conversion. On July 31 the department had 8,000 units in process that were 60% complete with respect to conversion. The department transferred 40,000 units out during the month, of which 10,000 units came from the beginning work in process inventory, and 30,000 units were started and completed during the month. All materials are added at the beginning of the process in Department A. What are the equivalent units of production for the month for materials and conversion, respectively?
A) 38,000 units and 36,800 units
B) 38,000 units and 38,000 units
C) 48,000 units and 44,800 units
D) 48,000 units and 48,000 units

Question

Quizplus · Accepted Answer

To calculate equivalent units of production, we need to consider the units that are completed during the period and the units that are still in process but are partially complete.

For materials:

Units completed = 40,000 units
Units in process = 8,000 units x 60% = 4,800 units
Total equivalent units of production for materials = 40,000 + 4,800 = 44,800 units

For conversion:

Units completed = 40,000 units x 100% = 40,000 units
Units in process = 8,000 units x 60% = 4,800 units + 10,000 units x 20% = 2,000 units (from beginning WIP)
Total equivalent units of production for conversion = 40,000 + 4,800 + 2,000 = 46,800 units

Therefore, the answer is A) 38,000 units and 36,800 units.

Billings Corporation Uses the First-In, First-Out Method in Its Process