Question

BOGO Inc. has two sequential processing departments, roasting and mixing. At the beginning of the month, the roasting department has 2,000 units in inventory, 70% complete as to materials. During the month, the roasting department started 18,000 units. At the end of the month, the roasting department had 3,000 units in ending inventory, 80% complete as to materials.

Cost information for the roasting department for the month is as follows:

Beginning work in process inventory (direct materials)	2,170
Direct materials added during the month	27,900

Short answer

Equivalent units of production are $18,000

Step-by-step solution

Meaning of the FIFO method

FIFO refers to selling the company's oldest stock first and its newest stock last. The FIFO methodology produces a higher-end stock value, a lower cost of goods sold, and a higher gross profit during inflation.

Analysis of data

Given,

Units in inventory are 2,000

Complete materials are 70%

WIP is 30%

Determining equivalent units under the FIFO-method

EUP for materials -FIFO	Equivalents units
Equivalent units to complete beginning WIP $(2,000\times 30\mathrm{\%})$	600
Equivalent units started and completed	15,000
Equivalents units in ending WIP $(3,000\times 80\mathrm{\%})$	2,400
Equivalent units of production	18,000

Note:

Units finished - Units starting work in progress equals Units started and finished, or 17,000 - 2,000, or 15,000 units. Units finished are calculated as follows: 17,000 = 2,000 + 18,000 - 3,000 (Units in beginning work in process + Units started - Units in finishing work in progress).