ExpertMedium2 marksMultiple Choice
ACCA · Question 14 · C. Cost accounting techniques
A chemical processing plant uses the FIFO (First-In, First-Out) method for process costing. At the start of the month, there were 2,000 units in opening work-in-progress (WIP), which were 60% complete with respect to conversion costs.
During the month, 8,000 units were started and completed. Closing WIP was 1,500 units, 40% complete with respect to conversion costs.
What are the equivalent units for conversion costs for the month under the FIFO method?
A chemical processing plant uses the FIFO (First-In, First-Out) method for process costing. At the start of the month, there were 2,000 units in opening work-in-progress (WIP), which were 60% complete with respect to conversion costs.
During the month, 8,000 units were started and completed. Closing WIP was 1,500 units, 40% complete with respect to conversion costs.
What are the equivalent units for conversion costs for the month under the FIFO method?
Answer options:
A.
8,600 units
B.
9,400 units
C.
10,600 units
D.
11,500 units
How to approach this question
Under FIFO, equivalent units = (Opening WIP * % needed to complete) + Units started and completed + (Closing WIP * % complete).
Full Answer
B.9,400 units✓ Correct
FIFO Equivalent Units calculation:
1. Work to finish Opening WIP: 2,000 units * (100% - 60%) = 800 equivalent units.
2. Units started and completed this period: 8,000 units = 8,000 equivalent units.
3. Work on Closing WIP: 1,500 units * 40% = 600 equivalent units.
Total = 800 + 8,000 + 600 = 9,400 equivalent units.
Common mistakes
Using the weighted average method (10,600 units) or multiplying opening WIP by the 60% already completed instead of the 40% remaining.
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