Question

Mountain Springs Water Company has two departments, Purifying and Bottling. The Bottling Department had 3,750 liters in beginning work in process inventory (30% complete). During the period, 61,830 liters were completed. The ending work in process was 6,300 liters (70% completed). All inventories are costed by the first-in, first-out method. What is the total equivalent units for direct materials (using the FIFO method) if materials were added at the beginning of the process

Answer 1

Mountain Springs Water Company

Step-by-step explanation:

a) Data and Calculations:

Units Percentage Equivalent

(litres) of completion Units (liters)

Beginning work in process = 3,750 (100% - 30%) 2,625

Started and completed = 58,080 100% 58,080

Ending work in process = 6,300 70% 4,410

Total equivalent unit 65,115

Or:

Completed during the period 61,830 100% 61,830

Ending work in process = 6,300 70% 4,410

Less units completed previously 3,750 30% 1,125

Total equivalent unit 65,115

b) Under the FIFO method, Mountain Springs can compute the equivalent units of production as equal to units transferred out (completed) plus equivalent units in ending work in process inventory minus equivalent units in beginning inventory. The equivalent units can also be computed by adding the equivalent unit of beginning work in process (completed during the current period) to the units started and completed during the current period and the equivalent unit of ending work in process. The two methods yield the same total equivalent units.