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 equivalent units of conversion costs 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 equivalent units of conversion costs was

Quizplus · Accepted Answer

Using the FIFO method, we need to calculate the equivalent units of conversion costs for each process separately and then add them up.

For the Mixing Department:
- Units started and completed: 10,000
- Work in process, ending: 1,000 units, 50% complete = 500 equivalent units
- Total equivalent units (weighted-average method): 10,000 + 500 = 10,500
- Equivalent units (FIFO method): same as the total equivalent units

For the Packaging Department:
- Units started and completed: 11,300
- Work in process, ending: 1,200 units, 80% complete = 960 equivalent units
- Total equivalent units (weighted-average method): 11,300 + 960 = 12,260
- Equivalent units (FIFO method): 10,000 + (5,300 x 80%) + 1,200 = 14,380

Therefore, the answer is B) 14,380.