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Exam Code: 220-1001
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NEW QUESTION: 1
A company employs a process cost system using the first-in, first-out FIFO) method. The product passes through both Department 1 and Department 2 in order to be completed.
Units enter Department 2 upon completion in Department 1 Additional direct materials are added in Department 2 when the units have reached the 25% stage of completion with respect to conversion costs. Conversion costs are added proportionally in Department 2.
The production activity in Department 2 for the current month was as follows:
How many equivalent units for direct materials were added in Department 2 for the current month?
A. 95.000 units.
B. 85,000 units.
C. 80,000 units
D. 70,000 units
Beginning inventory is 40% complete. Hence, direct materials have already been added. Ending inventory has not reached the 25% stage of completion, so direct materials have not yet been added to these units. Thus, the equivalent units for direct materials calculated on a FIFO basis are equal to the units started and completed in the current period 85.000 units completed - 15,000 units in BWIP = 70,000 units started and completed). A manufacturing company employs a process cost system. The company's product passes through both Department 1 and Department 2 in order to be completed. Conversion costs are incurred uniformly throughout the process in Department 2. The direct material is added in Department 2 when conversion is 80% complete. This direct material is a preservative that not change the volume. Spoiled units are discovered at the final inspection and are recognized then for sting purposes. The physical flow of units for the current month is presented below.
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