Exhibit 16-4 Timothy Company uses FIFO process costing. Material is added initially while conversion is added evenly throughout the process. The following information is available for the month just ended:

-Refer to Exhibit 16-4. How many equivalent units of conversion will be used in calculating product cost per unit?

Question

Exhibit 16-4 Timothy Company uses FIFO process costing. Material is added initially while conversion is added evenly throughout the process. The following information is available for the month just ended:
 
-Refer to Exhibit 16-4. How many equivalent units of conversion will be used in calculating product cost per unit?

Quizplus · Accepted Answer

To calculate equivalent units of conversion, we need to add up the percentage of completion of each unit with respect to conversion. As given in the table, there are 96,000 units in the process, each unit is 50% complete with respect to conversion. Therefore, the equivalent units of conversion will be 96,000 x 50% = 48,000 units. Since conversion is added evenly throughout the process, we don't need to consider the ending inventory or any other factor. Therefore, the correct answer is B) 87,200 (48,000 equivalent units of conversion + 96,000 units started and completed in the period).

Exhibit 16-4 Timothy Company Uses FIFO Process Costing