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

Quizplus · Accepted Answer

Equivalent units of materials: 
Units completed in May = 75,000 
Equivalent units of beginning WIP for materials = 50,000 
Total equivalent units of materials = 75,000 + 50,000 = 125,000

Equivalent units of conversion costs: 
Units completed in May = 75,000 
Equivalent units of beginning WIP for conversion costs = 50,000 x 40% = 20,000 
Equivalent units of May production for conversion costs = 75,000 x 80% = 60,000 
Total equivalent units of conversion costs = 20,000 + 60,000 = 80,000

Therefore, the equivalent units for materials and conversion costs respectively for May are 125,000 and 80,000. Choice D is the correct answer.

Aniston Enterprises Manufactures Stylish Hats for Sophisticated Women