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

To determine the number of units started and completed in July, we need to find the equivalent units completed during the month. 
Using the FIFO method: 
Equivalent units of direct materials = 12,500 units (completed in June) + 7,500 units (added in July) = 20,000 units 
Equivalent units of conversion costs = 12,500 units (completed in June) + 7,500 units (started in July but not completed) = 20,000 units 
Total equivalent units = min (equivalent units of direct materials, equivalent units of conversion costs) = 20,000 units 
Therefore, the number of units started and completed in July is 20,000 - 6,600 (ending WIP units) = 13,400 units.