Question

Winkle Corporation uses the FIFO method in its process costing system. Beginning inventory in the mixing processing center consisted of 5,000 units, 90% complete with respect to conversion costs. Ending work in process inventory consisted of 2,000 units, 60% complete with respect to conversion costs. If 10,000 units were transferred to the next processing center during the period, how many would the equivalent units for conversion costs be

Answer 1

6,300 units

Step-by-step explanation:

Cost is added gradually to the work in process, so we need to calculate the opening equivalent numbers of units and closing as well.

According to this method the equivalent units formula is as follow

Equivalent Units = Unit completed and transferred to Finished goods + Units in Work in Process x Completion percentage

Conversion

Equivalent unit opening WIP = 5,000 x (100% - 90%) = 500 units

Units Started and completed in the period = 5,000 units

Equivalent unit closing WIP = 2,000 x (100% - 60%) = 800 units

Equivalent Units = 5,000 + 500 + 800 units = 6,300 units

Answer 2

The equivalent units for conversion costs are 7,300

Step-by-step explanation:

Winkle Corporation

FIFO Method

Particulars Units % of Completion Equivalent Units

Materials Conversion Materials Conversion

Completed 10,000 100 100 10,000 10,000

Add Ending

WIP 2000 100 90 2000 1800

Less Beg.

WIP 5000 100 90 5000 4500

Total Equivalent Units 7000 7,300

In FIFO the equivalent units are always less than the equivalent units of the weighted average method.

The FIFO assigns costs to only the current period equivalent units.