Question

Refer to the information in Exercise 16-4 and complete the requirements for each of the three separate assumptions using the FIFO method for process costing.

Short answer

1. 72,000 equivalent units for the material.
2. 82,400 equivalent units for the material.
3. 70,400 equivalent units for the material.

Step-by-step solution

Definition of Equivalent Units of Production.

Equivalent units of production can be defined as the metric that calculates the work done by the business entity on the goods that are not completed during the period. In this metric, the finished and semi-finished goods are represented in terms of finished goods.

Equivalent units of production under the first assumption.

Particular	Material
Beginning inventory $\mathbf{(}\mathbf{24}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{(}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{100}\mathbf{\%}\mathbf{)}\mathbf{)}$	0
Units started and completed	56,000
Less: Ending inventory $(16,000\times 100\%)$	16,000
Equivalent units	72,000

Equivalent units of production under the second assumption.

Particular	Material
Beginning inventory $\mathbf{(}\mathbf{24}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{(}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{40}\mathbf{\%}\mathbf{)}\mathbf{)}$	14,400
Units started and completed	56,000
Less: Ending inventory $\mathbf{(}\mathbf{16}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{75}\mathbf{\%}\mathbf{)}$	12,000
Equivalent units	82,400

Equivalent units of production under the third assumption.

Particular	Material
Beginning inventory $\mathbf{(}\mathbf{24}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{(}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{60}\mathbf{\%}\mathbf{)}\mathbf{)}$	9,600
Units started and completed	56,000
Less: Ending inventory $\mathbf{(}\mathbf{16}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{30}\mathbf{\%}\mathbf{)}$	4,800
Equivalent units	70,400