The following unit data were assembled for the heating process of Morgan Processing, Inc., for the month of August. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process costing method. $\begin{array}{|l|l|}
\hline & \text { Units } \
\hline \begin{array}{l}
\text { Beginning work in process inventory } \
\text { (30 percent complete) }
\end{array} & 5,000 \
\hline \text { Units started in August } & 44,000 \\hline \begin{array}{l}
\text { Ending work in process } \
\text { (60 percent complete) }
\end{array} & 4,500 \
\hline
\end{array}$
-
The number of equivalent units produced with respect to conversion costs is

Question

The following unit data were assembled for the heating process of Morgan Processing, Inc., for the month of August. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process costing method. $\begin{array}{|l|l|}
\hline & \text { Units } \
\hline \begin{array}{l}
\text { Beginning work in process inventory } \
\text { (30 percent complete) }
\end{array} & 5,000 \
\hline \text { Units started in August } & 44,000 \\hline \begin{array}{l}
\text { Ending work in process } \
\text { (60 percent complete) }
\end{array} & 4,500 \
\hline
\end{array}$
-
 The number of equivalent units produced with respect to conversion costs is

Quizplus · Accepted Answer

To calculate the equivalent units for conversion costs using the FIFO method, we first determine the units completed and transferred out, then add the equivalent units for the ending work in process. The calculation is as follows:1. Units completed and transferred out = Units started and completed in August + Beginning WIP - Ending WIP = 44,000 + 5,000 - 4,500 = 44,500 units. Since the beginning inventory was 30% complete, we only consider the remaining 70% for these units, which is 70% of 5,000 = 3,500 units.2. For the ending WIP, 4,500 units were 60% complete, so the equivalent units for conversion costs are 60% of 4,500 = 2,700 units.Adding these together: 44,500 (total units that were worked on during August) - 3,500 (equivalent units from the beginning inventory since they were already 30% complete) + 2,700 (equivalent units for the ending WIP) = 43,700 + 2,700 = 46,400. However, there seems to be a miscalculation in the explanation provided. Correctly, it should be:1. Units from beginning WIP completed this period = 5,000 units (since they were already in process, we consider the completion part for conversion costs, but this step was incorrectly calculated in the explanation).2. Units started and completed this period = Total started - (Ending WIP + Beginning WIP completed) = 44,000 - 4,500 = 39,500 units (this calculation was to find units fully processed this period, but the correct approach is to consider all units that were worked on).3. Correct calculation for equivalent units for conversion costs:- For the beginning WIP, we consider the conversion costs needed to complete these units: 5,000 units * 70% (to complete them) = 3,500.- Units fully processed and transferred out = 44,000 - 4,500 (ending WIP) = 39,500. Since these units were started and completed in August, they count fully towards the conversion costs.- For the ending WIP, the equivalent units are 4,500 units * 60% = 2,700.Therefore, the correct calculation should be: - For units fully processed: 39,500 (since this includes units from beginning inventory that were completed and new units fully completed).- Plus the equivalent units for the ending WIP: 2,700.The sum is 39,500 + 2,700 = 42,200, which does not match any of the provided options, indicating a mistake in the explanation process. The correct approach to find the equivalent units for conversion costs under FIFO should consider the work needed to complete beginning inventory units, add fully processed units, and include the equivalent units for the ending inventory. Given the options and the initial explanation, the closest correct approach was intended to be option B) 45,700, based on the standard method of calculation, but the detailed calculation provided does not accurately lead to any of the given options due to a mistake in the explanation steps. The correct explanation should align with how FIFO calculates equivalent units, focusing on the work done in the current period, which includes finishing beginning inventory and processing new units, alongside the work done on ending inventory.

The Following Unit Data Were Assembled for the Heating Process