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

Answer:

The equivalent units for conversion costs are 7,300

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.

Answer 2

Answer:

6,300 units

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