Question

Painter Corporation has the following information for the current month:

Units started		100,000	units
Beginning Work in Process: (35% complete)		20,000	units
Normal spoilage (discrete)		3,500	units
Abnormal spoilage		5,000	units
Ending Work in Process: (70% complete)		14,500	units
Transferred out		97,000	units
Beginning Work in Process Costs:
	Material	$15,000
	Conversion	10,000

All materials are added at the start of the production process. Painter Corporation inspects goods at 75 percent completion as to conversion.

Refer to Painter Corporation. What are equivalent units of production for conversion costs, assuming FIFO?

Answer 1

Solution:

FIFO Method in Process Costing

In FIFO method, the unit of beginning inventory is completed first and then Units received during the period is completed.

Important Points related to Normal or Abnormal Loss in Process Costing

Abnormal Spoilage/Loss -- Degree of completion (DOC) of Abnormal Loss is always 100% for all components if not given in question.

Normal Spoilage/Loss -- Degree of Completion is NOT APPLICABLE

	Physical Units	Equivalent Units for Conversion Cost
Partial Completed Beginning Work in Process during the period (65% for Conversion)	20000	13000 (20,000*65%)
Units started and completed during the period	77000	77000
Completed and Transferred Out Units	97000	90000
Normal Loss (refer notes)
Abnormal Spoilage (Since the goods are inspected at 75%, so the abnormal spoilage should be known at 75% completion level)	5000	3750 (5000*75%)
Ending Work In Process (70% completed for Conversion)	14500	10150 (14500*70%)
Total	116500	103900

Equivalent units of production for conversion costs, assuming FIFO = 103,900 Units

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