On March 1,Atlanta Company had 20,000 units of WIP in Department A,which were 100% complete as to material costs and 30% complete as to conversion costs.During March,150,000 units were started in Department A and 160,000 units were completed and transferred to Department B.WIP on March 31 was 100% complete as to material costs and 50% complete as to conversion costs.By what amount would the equivalent units for conversion costs for the month of March differ if the FIFO method were used instead of the weighted-average method?

Question

Quizplus · Accepted Answer

Under the FIFO method, only the work done during the current period is considered for equivalent units. The beginning WIP (20,000 units) was 30% complete, so 70% of the work was done in March. Therefore, the equivalent units for conversion costs under FIFO would be 160,000 (completed) - 20,000 (beginning WIP) + 20,000 * 70% (work done in March) + 10,000 * 50% (ending WIP) = 154,000. Under the weighted-average method, it would be 160,000 (completed) + 10,000 * 50% (ending WIP) = 165,000. The difference is 165,000 - 154,000 = 6,000 decrease.

On March 1,Atlanta Company Had 20,000 Units of WIP in Department