Question

Refer to the following information about the Finishing Department in the Gallagher Factory for the month of June. Gallagher Factory uses the FIFO method of inventory costing.

Beginning Work in Process inventory:
Physical units..... 5000
% complete for materials 70%
% complete for conversion costs 25%
Materials cost from May 7350
Conversion costs from May 3125
Product started:
Physical units 44000
Ending Work in Process inventory:
Physical units 4000
% complete for materials 40%
% complete for conversion costs 10%
Manufacturing costs for June:
Materials 96975
Conversion costs 79470
Compute equivalent units for direct materials for June.

Answer 1

The equivalent units for direct materials for June in the Finishing Department using the FIFO method are computed by considering the units started and completed during the month and the percentage completion of the ending work in process inventory. The completed units from the beginning inventory are not included in this calculation because those materials were added before June. The total equivalent units for direct materials amount to 40,600 units.

Step-by-step explanation:

To compute the equivalent units for direct materials for June using the FIFO method, we need to account for the completion of the beginning work in process inventory (WIP) and the materials added to the production process during the month.

The formula for equivalent units under FIFO is:

Equivalent Units = Units completed + (Ending WIP inventory * % completion of ending WIP) - (Beginning WIP inventory * % completion of beginning WIP)

First, calculate the units that were completed from the beginning inventory:

Beginning WIP units (5,000 units) * (% completion for materials: 70% already completed in May) = 3,500 units

These 3,500 units were already 70% complete and do not count towards June's equivalent units for materials since those materials were added before June.

Next, add the materials for units started and completed this month (excluding the beginning WIP):

Total units to account for = Product started (44,000 units) - Beginning WIP (5,000 units) = 39,000 units

All these 39,000 units are 100% complete with respect to the materials added in June.

Finally, determine the equivalent units for the ending WIP inventory:

Ending WIP inventory (4,000 units) * (% completion for materials: 40%) = 1,600 units

Now, compute the total equivalent units for direct materials:

Equivalent Units for Materials = 0 (completed units from beginning inventory) + 39,000 (units started and completed this month) + 1,600 (equivalent units from ending WIP inventory) = 40,600 equivalent units for materials

The equivalent units for direct materials for June in the Finishing Department using the FIFO method are 40,600 units.

Answer 2

the equivalent units for direct material is 43,100 units

Step-by-step explanation:

The computation of the equivalent units for direct material is shown below:

= Ending work in process units + units started and completed + opening work in process units

= 40% of 4,000 units + (44,000 - 4,000) + 30% of 5,000

= 1,600 units + 40,000 units + 1,500 units

= 43,100 units

hence, the equivalent units for direct material is 43,100 units