Question

Holly Company has the following information for December 1 to December 31. All direct materials are 100% complete.

Beginning balance December 200 units, 20% complete for conversion $14,000
Completed 800 units and transferred to finished goods inventory $131,182
Direct materials 54,000
Direct labor 34,000
Factory overhead Property taxes 6,000
Depreciation 32,000
Utilities 18,000
Indirect labor 4,000
Ending balance December 31, 300 units, 40% complete 30,818

Required:
Calculate equivalent units using the weighted-average and FIFO methods.

Answer 1

To calculate equivalent units for the Holly Company, for the weighted-average method, it is 920 equivalent units, while for the FIFO method, it is 880 equivalent units, considering the beginning inventory and the work completed during the period.

Step-by-step explanation:

The student's question pertains to calculating the equivalent units of production for the Holly Company using both the weighted-average and FIFO methods in a process costing system. It's important to note that all direct materials are 100% complete, which affects the calculation of equivalent units only for conversion costs.

To calculate the equivalent units using the weighted-average method, we combine the work done on the beginning inventory and the work done during the current period:

• Equivalent units for conversion costs = Units completed + (Ending WIP units * Percentage completion for conversion)

In the case of the Holly Company:

• Equivalent units for conversion costs = 800 units completed + (300 units * 40% completion) = 800 + 120 = 920 equivalent units

For the FIFO method, we consider only the work done during the current period:

• Equivalent units for conversion costs = Units completed + (Ending WIP units * Percentage completion for conversion) - (Beginning WIP units * Percentage completion at beginning)

In the case of the Holly Company:

• Equivalent units for conversion costs = 800 units completed + (300 units * 40% completion) - (200 units * 20% completion) = 800 + 120 - 40 = 880 equivalent units

Answer 2

Weighted Average : Materials = 1,100 units, Conversion Costs = 920 units

FIFO : Materials = 1,100 units, Conversion Costs = 1,260 units

Step-by-step explanation:

Weighted Average

Materials

Ending Work In Process (300 ×100 %) = 300 units

Completed and Transferred (800 ×100 %) = 800 units

Equivalent units in respect to materials = 1,100 units

Conversion Costs

Ending Work In Process (300 ×40 %) = 120 units

Completed and Transferred (800 ×100 %) = 800 units

Equivalent units in respect to conversion costs = 920 units

FIFO

Materials

To finish Opening Work in Process (200 × 0%) = 0 units

Started and Completed (800 × 100%) = 800 units

Ending Work in Process (300 × 100%) = 300 units

Equivalent units in respect to materials =1,100 units

Conversion Costs

To finish Opening Work in Process (200 × 80%) = 160 units

Started and Completed (800 × 100%) = 800 units

Ending Work in Process (300 × 40%) = 300 units

Equivalent units in respect to materials =1,260 units