Question

] Marlan Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly department. The units are completed in assembly by adding the remaining direct materials when the units are 60% complete with respect to conversion costs. Conversion costs are added evenly in assembly. The production activity in the assembly department for the current month is presented as follows. Marlan uses the FIFO inventory method in its process costing system. Beginning inventory units (25% complete with respect to conversion costs) 8,000 Units transferred in from the molding department during the month 42,000 Units to account for 50,000 Units completed and transferred to finished goods inventory 38,000 Ending inventory units (40% complete with respect to conversion costs) 12,000 Units accounted for 50,000 The equivalent units for materials in Marlan’s assembly department for the current month are A. 30,000 units. B. 38,000 units. C. 50,000 units. D. 42,000 units.

Answer 1

Solution: 38,000 units

Explanation: As company uses the FIFO method, thus to compute equivalent units (EUP) we will add: No. of EUP to finish beginning WIP + No. of units started and completed + No. of EUP to start ending WIP

When the unit is 60% complete the materials it can be added to the process. Due to this, none of the beginning WIP had materials, thus materials required to be added to all of the beginning WIP equals 8,000 EUP. The no. of units started and completed equals 30,000 (Units transferred out i.e. 38,000 units - Beginning WIP i.e. 8,000 units). Because ending WIP is not yet to the 60% stage of completion, thus no material was added to them. Now adding 8000 + 30,000 gives us 38,000