Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the FIFO method, the number of units started and completed in July was

Question

Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities:  Using the FIFO method, the number of units started and completed in July was

Quizplus · Accepted Answer

Using the FIFO method, we calculate the number of units completed and transferred out of the process during July by adding the units that were started in July to the units that were already in process on July 1st, and then subtracting the units that were still in process at the end of July.

Units in process on July 1st = 1,500
Units started in July = 13,400
Total units to account for = 14,900

Units in process on July 31st = 1,500 + 900*(60% completed) = 2,340

Units completed and transferred out = 14,900 - 2,340 = 12,560

Therefore, the correct answer is C) 13,400 (the number of units started in July).