Softcloth Textile Pty Ltd manufactures a variety of fabrics. The Weaving Department had 1000 units in work in process on April 1, which were 20 per cent complete as to conversion costs. During April, 8000 units were completed and transferred. On April 30, 4000 units remained in work in process 50 per cent complete as to conversion costs. Using the FIFO method of process costing, calculate the equivalent units of conversion for the month of April.
A) 9000
B) 9800
C) 10 000
D) 12 000

Question

Quizplus · Accepted Answer

Under the FIFO method, the equivalent units of conversion for April are calculated by adding the units completed and transferred out (which are 100% complete for conversion costs) to the equivalent units for the ending work in process inventory. The calculation is as follows: - Units completed and transferred out: 8000 units (these are 100% complete, so 8000 equivalent units for conversion).- For the beginning work in process, only the work done in April is considered. Since they were already 20% complete, the remaining 80% needed to be completed for the 1000 units from the beginning inventory. However, since these units are part of the 8000 units completed and transferred out, they are already accounted for and do not add additional equivalent units under FIFO.- Ending work in process: 4000 units at 50% complete for conversion costs, which equals 2000 equivalent units for conversion.Adding these together: 8000 (completed and transferred out) + 2000 (ending WIP at 50% for conversion) = 10,000 equivalent units for conversion. However, considering the FIFO method correctly, we should not count the completion of beginning inventory again as it's included in the transferred out units. Therefore, the correct calculation is:- 8000 units transferred out (fully completed during April, excluding the progress from the previous period) + 2000 units (50% of the 4000 units in ending WIP) = 10,000. This seems to contradict the explanation, indicating a mistake in the explanation process. The correct approach under FIFO for calculating equivalent units of conversion should consider the work done only in the current period on units from both beginning inventory and units started and completed during the month or left in ending inventory. Given the error in the explanation process and reevaluating the correct approach:- The work done on the beginning inventory to complete it is not additional since it's part of the 8000 units completed.- Correctly, we should calculate the equivalent units for the ending WIP and the units fully processed during the month.Thus, the correct calculation without mistakenly including the beginning inventory completion again (since it's part of the 8000 units) and focusing on the units processed during the month would indeed result in a reevaluation of how the equivalent units are considered, particularly focusing on the ending WIP and the work done during the current month. Given the initial mistake in calculation and explanation, the focus should be on the units processed during the current period under FIFO, which leads to a reconsideration of the calculation method provided. However, based on the initial setup and the common understanding of FIFO calculations:- The units completed and transferred out are fully accounted for.- The ending WIP needs to be considered for the work done in the current period.The initial calculation provided was incorrect in the explanation, leading to confusion. The correct answer should reflect the equivalent units for work done in the current period, considering the FIFO method's principles. Given the provided options and the mistake in the explanation process, the correct calculation directly aligns with how FIFO typically accounts for work done in the current period on the ending WIP and the units processed during the month.

Softcloth Textile Pty Ltd Manufactures a Variety of Fabrics