Equivalent Units CalculationsFIFO Method Terrace Corporation

Equivalent Units Calculations—FIFO Method

Terrace Corporation makes an industrial cleaner in two sequential departments, Compounding and Drying. All material is added at the beginning of the process in the Compounding Department. Conversion costs are added evenly throughout each process. Terrace uses the FIFO method of process costing. In the Compounding Department, beginning work in process was 3,000 pounds (50% processed), 51,000 pounds were started, 48,000 pounds were transferred out, and ending work in process was 80% processed.

Calculate equivalent units for the Compounding Department for August 2016.

Equivalent Units Calculations-FIFO Method Terrace Corporation makes an industrial cleaner in two sequential departments, Compounding and Drying. All material is added at the beginning of the process in the Compounding Department. Conversion costs are added evenly throughout each process. Terrace uses the FIFO method of process costing. In the Compounding Department, beginning work in process was 3,000 pounds (50% processed), 51,000 pounds were started, 48,000 pounds were transferred out and ending work in process was 80% processed. Calculate equivalent units for the Compounding Department for August 2016. Terrace Corporation Flow of Units and Equivalent Units Calculation, August 2016 Equivalent Units % in August Direct Materials Conversion Costs %in August Complete/Transferred Beginning inventory Started & completed Ending inventory Total

Solution

Calculate equivalent unit :

	Physical unit	%	Equivalent unit of material	%	Equivalent unit of conversion cost
Completed /transferred
Beginning inventory	3000	0%	0	50%	1500
Started & Completed	45000	100%	45000	100%	45000
Ending inventory	6000	100%	6000	80%	4800
Total	54000		51000		51300