Statement showing the computation of equivalent units under FIFO method:
Flow of production
work in process, beginning
Started during current period
To account for
Good units completed and transferred for
From beginning work in process
(1,000 × (100%-100%); 1,000 (100% - 50%)
Started and completed
(8,000 ×100%); 8,000 ×100%)
(100 ×100%; 100 × 100%
Work in process ending
(2,000 ×100%; 2,000 × 30%)
Equivalent units of work done to date
Equivalent units for direct material are 11,150, and equivalent units for conversion costs are 9,250 units.
1. The total material cost for WIP was already considered 100 percent in the previous period and hence work in process beginning for material will be nil. WIP conversion cost incurred in the current period is 50% only and hence 500 units (50 percent of 1,000 units) were taken.
2. Good units completed and transferred out (9,000 units) contain two types. 1,000 units are from work in process beginning (assumed that they are completed first and transferred out) and the remaining 8,000 units are started and completed in the current period. Units started in current period and are not completed will be carried forward to next period and will become the beginning work in process for the next period.
3. Normal spoilage and abnormal spoilage were also 100 percent completed and hence equivalent units for direct material and conversion costs were taken with full value.
4. Work in process (ending) was 100 percent completed for direct material and 30 percent complete for conversion costs and hence equivalent units for direct material was taken with full value (2,000 units) and conversion costs were taken with 30 percent value 600 units (2,000x0.3).