Hi Derrick,
Under FIFO only materials used in the current period are considered in calculating EUP (this is different than weighted average method).
- The first step is to determine the 3 different included amounts for calculating EUP (Beg WIP, Units Started and Completed, End WIP)
Beginning WIP (given): 32,000
Units Started and completed = Units started (200,000) – End WIP (48,000) = 152,000
End WIP (given): 48,000
- Next determine the percentage complete for each of the three line items:
Beg WIP: 32,000 x 40% = 12,800
[since units in beg inventory were 60% complete for DM, only 40% remain to be completed – so the 40% is calculated by subtracting 100% - 60% = 40%]
Units Started and completed: 152,000 x 100% = 152,000 [in both the FIFO method and weighted avg. method - all units started and completed are included in EUP]
End WIP: 48,000 x 90% = 43,200 [we are using the 90% (given) DM amount as all of these materials were used in the current period]
Finally add all amounts together for the answer:
BEG WIP – 12,800
Started/completed – 152,000
End WIP – 43,200
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Total EUP = 208,000
Hope this helps!
Best,
Kirk
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Kirk Nebel
Accountant
Santa Clarita CA
United States
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Original Message:
Sent: 11-14-2020 10:56 AM
From: Derrick Durbin
Subject: Chapter 6 Gleim Outline
Hello,
For the following question the correct answer is 208,000 but its not clear in the explanation on why they use the numbers they do? Answer is calculated as follows: EUP=(48,000*90%) + 184,000 - (32,000 x 60%)
A company uses process costing to manufacture Product X and has the following physical unit flow information available for the month of January.Beginning work-in-process inventory, January 1 | 32,000 |
Started in production during January | 200,000 |
Completed production during January | 184,000 |
Ending work-in-process inventory, January 31 | 48,000 |
The beginning inventory was 60% complete for direct materials and 30% complete for conversion costs. The ending inventory was 90% complete for direct materials and 60% complete for conversion costs. Using the first-in, first-out method, the equivalent units of production for direct materials are