Oregonian Fisheries Inc.processes king salmon for various distributors.Two departments are involved - processing and packaging.Data relating to tons of king salmon processed in the processing department during June 2010 are provided below:
Total equivalent units for conversion under the FIFO method are calculated to be:
A)6,860 equivalent units.
B)8,480 equivalent units.
C)6,480 equivalent units.
D)7,440 equivalent units.
E)7,920 equivalent units.

Question

Oregonian Fisheries Inc.processes king salmon for various distributors.Two departments are involved - processing and packaging.Data relating to tons of king salmon processed in the processing department during June 2010 are provided below: 
Total equivalent units for conversion under the FIFO method are calculated to be:
A)6,860 equivalent units. 
B)8,480 equivalent units. 
C)6,480 equivalent units. 
D)7,440 equivalent units. 
E)7,920 equivalent units.

Quizplus · Accepted Answer

The total tons processed in the processing department during June 2010 were 15,200. Since the FIFO method assumes that units completed and transferred out are done so first, equivalent units are calculated by adding the completed and transferred out units (which are the same under FIFO) and the equivalent units in ending work in process inventory. In this case, there were 6,080 tons completed and transferred out, and the ending work in process inventory had 400 tons that were 100% complete as to processing, but only 80% complete as to packaging. Therefore, the equivalent units for conversion are 6,080 + (400 x 0.80) = 6,480 equivalent units.