Tarte Inc. started the year with 6,500 individual apple sauce containers in their Work-in-Progress (WIP) Inventory with 25% being complete overall. Tarte adds both Conversion Costs (CC) and Direct Material (DM) resources evenly throughout the process. During the year, Tarte started 105,000 more containers and had completed 90,000 in total by the end of the year. Their ending WIP Inventory units are 74% complete overall. Using the First-In, First-Out (FIFO) method of process costing, what are the equivalent units of production for the year?

Question

Quizplus · Accepted Answer

This question requires calculation of equivalent units of production using the FIFO method which means that the beginning inventory must be included in the calculation. First, determine how many units to account for. Using the FIFO method, this includes adding the beginning inventory of 6,500 to the units started during the period of 105,000 for a total of 111,500. Next, subtract the number of units completed and removed, 90,000, to arrive at an ending inventory of 21,500 units. The equivalent units under the FIFO method will be equal to the beginning units times the percentage of completion (6,500 × 75%) plus units started and completed times their percentage of completion ((105,000 - 21,500) × 100%) plus the units in ending WIP inventory times their percentage completion (21,500 × 74%). 4,875 + 83,500 + 15,910 = 104,285 units.

Tarte Inc Started the Year with 6,500 Individual Apple Sauce Containers