Question

what were the equivelent units for conversion costs during feb

Comfort chair company manufacturers a standard recliner During February, the firm's Assembly Department started production of 73 900 chairs. During the month the firm completed 78 200 chairs, and transferred them to the finishing Department. The firmended the month with 11400 chairs in ending inventory. There were 15,700 chairs in beginning inventory Al direct materials costs are added at the beginning of the production cycle and conversion costs are added un formly throughout the production process. The FIFO method of process costing is used by Comfort Beginning work in process was 25% complete as to conversion cost, while ending work in process was 85% complete as to conversion Beginning inventory Direct mails $24900 Conversion cous 35 800 Manufacturing costs added during the accounting period Direct materials 100 000 Conversion costs 27200 What were the equivalent units for conversion cont during February O A 77825 OB. 73,300 OC. 83,905 OD 05.300 Click to set your answer

Answer 1

Normally when production takes place, then some parts are completed fully while some are work in progress and are still remaining to be completed by the end of the year. In order to allocate all expenses incurred among completed portion of units produced, we use EQUIVALENT UNITS which can easily be defined as summation of 3 things
1- Remaining part of Opening inventory that was completed within current year
2- Total units that were started and completed in current year
3- Portion of closing inventory that were completed within the current year

Using the above explanation we find EQUIVALENT UNITS of given sum from 3 parts of inventory
1- Opening inventory remaining to be completed and was done so in the current year
=> 15700 chairs X (100-25% complete)
=> 15700 chairs X 75%
=> 11775 chairs

2- That part of production that was started and completed within current year
=> No. of chairs entered production - Closing inventory
=> 73900 chairs - 11400 chairs
=> 62500 chairs

3- Portion of closing inventory completed during current year
=> 11400 chairs X 85%
=> 9690 chairs

Hence EQUIVALENT UNITS for conversion costs during February
= 11775 chairs + 62500 chairs + 9690 chairs
=> 83965 chairs (Option 'C')