Question

RSTN Co. produces its product through two sequential processing departments. Direct materials and conversion are added to the product evenly throughout the process. The company uses monthly reporting periods for its process costing system.

During October, the company finished and transferred 150,000 units of its product to Department 2. Of these units, 30,000 were in process at the beginning of the month and 120,000 were started and completed during the month. The beginning work in process inventory was 30% complete. At the end of the month, the work in process inventory consisted of 20,000 units that were 80% complete.

Compute the number of equivalent units of production for October. Use the FIFO method.

Short answer

Equivalent units of production

Direct material:140,000 units

Conversion:157,000 units

Step-by-step solution

Definition of FIFO

A method used to determine the value of inventory under which the goods purchased by the business entity first are sold out first is known as FIFO.

Calculation of the number of equivalent units of production for October

Particular	Direct material	Conversion
Equivalent units to complete beginning work in process:
Material (0% of 30,000)	0
Conversion (70% of 30,000)		21,000
Units started and completed	120,000	120,000
Equivalent units in ending work-in-process
Direct material (100% of 20,000)	20,000
Conversion (80% of 20,000)		16,000
Equivalent units of production	140,000	157,000