Question

1. Use this information about Penny, Inc. to answer the question that follow.

Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about the July activities:

On July 1:
Beginning inventories	850 units, 60% complete
Direct materials cost	$5,000
Conversion costs	$4,000
During July:
Number of units started	15,000
Direct materials added	$155,000
Conversion costs added	$83,520
On July 31:
Ending inventories	1,600 units, 40% complete

Using the FIFO method, the number of equivalent units of conversion costs was

a.15,850

b.14,380

c.14,400

d.14,550

2. Use this information about Carmelita Inc. to answer the question that follow.

Carmelita Inc. has the following information available:

	Costs from Beginning Inventory	Costs from Current Period
Direct materials	$6,000	$28,100
Conversion costs	5,400	142,400

At the beginning of the period, there were 600 units in process that were 42% complete as to conversion costs and 100% complete as to direct materials costs. During the period, 5,300 units were started and completed. Ending inventory contained 300 units that were 34% complete as to conversion costs and 100% complete as to materials costs. The company uses the FIFO process cost method.

The equivalent units of production for direct materials and conversion costs, respectively, were

a.5,300 for direct materials and 5,750 for conversion costs

b.5,600 for direct materials and 5,750 for conversion costs

c.5,750 for direct materials and 5,750 for conversion costs

d.5,750 for direct materials and 5,600 for conversion costs

Answer 1

Answer 1

b.14,380

Calculations:

Particulars	Output	Material		Conversion cost
		%	Units	%	Units
Opening Inventory	850	0%	-	40%	340
Started and completed	13,400	100%	13,400	100%	13,400
Ending Inventory	1,600	100%	1,600	40%	640
Total	15,850		15,000		14,380

Clearly, option b is correct and other options are incorrect.

Answer 2

b.5,600 for direct materials and 5,750 for conversion costs

Calculations:

Particulars	Output	Material		Conversion cost
		%	Units	%	Units
Opening Inventory	600	0%	-	58%	348
Started and completed	5,300	100%	5,300	100%	5,300
Ending Inventory	300	100%	300	34%	102
Total	6,200		5,600		5,750

Clearly, option b is correct and other options are incorrect.

Note:

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