Aniston Enterprises manufactures stylish hats for sophisticated women. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Goods in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to direct labor and overhead; includes $70,500 of direct material cost; $34,050 of conversion costs). Goods in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs). If Aniston Enterprises uses the FIFO method of process costing, compute the equivalent units for materials and conversion costs respectively for May.

Question

Aniston Enterprises manufactures stylish hats for sophisticated women. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Goods in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to direct labor and overhead; includes $70,500 of direct material cost; $34,050 of conversion costs).  Goods in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs).  If Aniston Enterprises uses the FIFO method of process costing, compute the equivalent units for materials and conversion costs respectively for May.

Quizplus · Accepted Answer

Using the FIFO method, the equivalent units are calculated as follows:

Materials: 
50,000 units from beginning WIP + (100% x 75,000 units started and completed) + (20% x 75,000 units in ending WIP) = 50,000 + 75,000 + 15,000 = 140,000 equivalent units

Conversion costs: 
40% x 50,000 units from beginning WIP + (100% x 75,000 units started and completed) + 20% x 75,000 units in ending WIP = 20,000 + 75,000 + 15,000 = 110,000 equivalent units

Therefore, the answer is D) 225,000; 195,000.

Aniston Enterprises Manufactures Stylish Hats for Sophisticated Women