The following data are available for a company's manufacturing activities: Assume the company uses FIFO inventory. If materials are added when the production process begins and direct labor is applied uniformly throughout the process, what are the equivalent units for direct materials and for direct labor, respectively?

Question

Quizplus · Accepted Answer

Since the company uses FIFO, we need to calculate the equivalent units separately for materials and labor.

For direct materials:
Units started and completed = 5,000
Units in process (60% complete) = 2,000 x 60% = 1,200
Total equivalent units = 5,000 + 1,200 = 6,200

For direct labor: 
Units started and completed = 5,000
Units in process (60% complete) = 2,000 x 60% = 1,200
Total equivalent units = 5,000 + 1,200 = 6,200

Therefore, the equivalent units for direct materials and for direct labor, respectively, are 6,200 each.

The only answer choice that matches this is C.

The Following Data Are Available for a Company's Manufacturing Activities