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

Answer:

Mountain Springs Water Company

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.