Question

The following production data were taken from the records of the Finishing Department for July:

Inventory in process, July 1, 40% completed 4,000 units
Transferred to finished goods during July 37,500 units
Ending work in process during July, 20% completed 3,500 units

Required:
Determine the total equivalent units for direct materials, assuming that the first-in, first-out method is used to cost inventories. Assume that all direct materials are placed in the process at the beginning of production.

a. 39,400 units
b. 36,600 units
c. 37,000 units
d. 41,000 units

Answer 1

c. 37,000 units

Step-by-step explanation:

Calculation to Determine the total equivalent units for direct materials, assuming that the first-in, first-out method is used to cost inventories

Using this formula

Total equivalent units for direct materials= Transferred to finished goods during the month of July + Ending work in process during the month of July - Inventory in process as on July 1

Let plug in the formula

Total equivalent units for direct materials= 37,500 units + 3,500 units - 4,000 units

Total equivalent units for direct materials= 41,000 units - 4,000 units

Total equivalent units for direct materials= 37,000 units

Therefore the total equivalent units for direct materials, assuming that the first-in, first-out method is used to cost inventories is 37,000 units