Tater Company produces tater tots that it packages in one pound bags and sells to vendors around the region. Management is compiling its cost information after August, its second month of operation. July ended with 8,600 packages in inventory that are 35% complete overall. They started 116,800 packages and completed 84,338 units during the month. Their ending Work-in-Progress (WIP) packages are 79% complete overall for August. What are the equivalent units of production if Tater uses the First-In, First-Out (FIFO) method? (Round to the nearest unit.)

Question

Quizplus · Accepted Answer

This question requires familiarity with the calculation of equivalent units while using FIFO, and that means that beginning inventory will be factored in separately. In addition, it requires the solution of both units in their beginning and ending inventories. To calculate the beginning inventory, along with the percentage of completion, look at what was remaining at the end of the previous month since this will become the beginning balance for August. July ended with 8,600 packages with 35% completion, so use these numbers for the beginning inventory for August. To solve for ending inventory, determine how many units to account for which uses the following formula: Beginning inventory plus units started minus units completed. 8,600 + 116,800 - 84,338 = 41,062 ending inventory packages. For the equivalent units, add the following: (8,600 × 65%) + (75,738 × 100%) + (41,062 × 79%) = 5,590 + 75,738 + 32,438.98 = 113,767 units.

Tater Company Produces Tater Tots That It Packages in One