Question

Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.

Compute the equivalent units of production for direct materials and conversion

costs for the Filtration Department using the FIFO method.

Short answer

The equivalent unit of production for direct material is 200,000 liters, and for conversion costs, 186,000 liters.

Step-by-step solution

Step-by-Step Solution:Step 1: Equivalent Unit of Production

The equivalent units of production denote the amount of work done on the partially completed units at the end of the reporting period. It represents units in terms of fully completed units.

Equivalent unit of production (EUP) for direct material

$$\begin{gathered} \mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{directmaterial}\mathbf{=}(\mathbf{Completed}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{}\mathbf{\%})\mathbf{+}(\mathbf{WIP}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{130}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{70}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{100}\mathbf{\%}) \\ \mathbf{=}\mathbf{200}\mathbf{,}\mathbf{000} \end{gathered}$$

Equivalent unit of production for conversion cost

$$\begin{gathered} \mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Conversion}\mathbf{}\mathbf{cost}\mathbf{=}(\mathbf{Completed}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{WIP}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{130}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{70}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{80}\mathbf{\%}) \\ \mathbf{=}\mathbf{186}\mathbf{,}\mathbf{000} \end{gathered}$$