Question

A.  Mark Goodwin Ltd. has a beginning work in process inventory of 25,000 units, 40 percent complete. During the period, 100,000 units were transferred in from a preceding process. The ending work in process inventory was 20,000 units, 80 percent complete. What are the equivalent units for the conversion costs, assuming that the company uses the weighted average method?
a. 106,000 b. 115,000 c. 121,000 d. 131,000

B.  Under which of the following conditions will the first-in, first-out method produce the same cost of goods manufactured as the weighted average method?

a. There is no ending work in process inventory.

b. There is no beginning work in process inventory.
c.   The beginning and ending work in process inventories are equal.

d. The beginning and ending work in process inventories are both 50 per

Answer 1

A. Answer: 121,000

Explanation:

Calculation of Equivalent Units

Units Completed = Units at the beginning + units transferred - closing units

= 25,000 + 100,000 - 20,000

= 105,000

Under the Weighted Average Method, the costs are allocated on the basis of an average and applied to units transferred out and units existing as closing inventory.

Equivalent units for conversion cost = (Units completed x 100%) + (closing units x % of completion)

= (105,000 x 100%) + (20,000 x 80%)

= 105,000 + 16,000

= 1,21,000

B. Answer: b. There is no beginning work in process inventory

Explanation

The difference between the FIFO method and the Weighted average method is the treatment of the cost of the beginning inventory, When there is no beginning inventory, The Weighted average cost method yields the same result as FIFO method.