 hello in this lecture we're going to work some test type problems problems that could be short enough to fit into a multiple choice type format so we have here a company uses the FIFO method for inventory costing at the beginning of a period the production department had 30,000 units at the beginning in working process support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a youtube page we also include added resources such as excel practice problems pdf files and more like quickbooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it inventory which were 45 complete the department completed the transfer 170,000 units at the end of the period 27,000 units were in the ending working process and 80 complete compute the number of equivalent units produced by the department so what we're doing here of course is transferring from the working process to finished goods and in order to do that we have to determine how much of the goods have been completed in terms mainly of conversion costs which means the amount of labor and the amount of overhead that's going into these units we're going to assume a first and first out meaning that the stuff that was in there at the beginning has you know been transferred out we finished those first before we started on some other units that's the assumption that we're making on the flow assumption so if we take a look at this we're going to break this out this way we could say beginning working process we had 30,000 units now those units are of all areas of completion and we're going to come to some kind of determination on how complete they're done meaning we got probably the raw materials in there how much completed have been done in terms of the work to the raw materials and the overhead applied to it the conversion type stuff we're going to say 0.45 45 percent if we go to the home tab we go to the numbers we add decimals or we make it a percentage we're going to say that those 30,000 units are equivalent to the 30,000 times 45 the equivalent units of 13,500 now the trick to this is to have the units that are both started and completed and if we could do that we can say okay those units are 100 completed throughout the process because we started and completed them now they're not going to include this one this 30,000 of course because those were started last period last month probably and therefore those are going to be completed but they weren't started and completed they were just finished here and therefore we're going to try to figure out how much were started and completed we could do that by saying how many units were transferred out in total 170,000 total units were transferred from the working process to the ending therefore we can take the 170,000 that were transferred out and we're going to subtract from that the 30,000 because those are included in the 170,000 and they weren't started and completed so that means that 140,000 were started and completed and of course those are one or a hundred percent completed and started during the time period so if we calculate the equivalent units 140 times 100 percent will be 140 and then we have the ending working process so the ending working process they say are 27,000 those are the stuff that's still in there not quite done and they're going to have to give us some kind of rate of completion on that we're going to say 80.8 so I'm going to go back here home tab numbers make it a percentage therefore the equivalent units would be equal to the 27,000 times the 80 percent or 21.6 okay let's read back here we're going to say compute the number of equivalent units produced by the department now it's going to be one other piece we're going to need to figure out here we've produced the amount that was finished in this beginning working process as of the end of last time meaning there was 45 units that were completed equivalent units of 13.5 that means we're going to have to finish those units so there's a couple ways we can calculate the amount that will be done at this period one is we could say well if we did 45 percent last time we're going to have to take 100 percent minus 45 percent and if we make that a percentage that would mean 55 so if it was 45 percent done last time how much is it going to be done this time 30,000 times the remaining 55 or of course we could have also said if there's 30,000 units and we did 13.5 equivalent units that means we got the 16.5 we're going to have to do this time so this was done in this period this was done in this period and this is the beginning inventory that will be will be completed this time therefore if we sum these up then we get the 16.5 plus the 140 plus the 21.6 gives us the 178.1 equivalent unit next one says that during the month the production department of a process operations system completed and transferred to finished goods 20,000 units that were in process at the beginning of the month and 180,000 that were started and completed in the month the month's beginning inventory was 100 complete with respect to materials 62 complete with respect to conversion at the end of the month 37,000 additional units were in process in the production department and were 100 complete with respect to materials 21 complete with respect to conversion compute the number of equivalent units with respect to both materials and conversion respectively so this is a very long ugly looking problem here but if we get the format of these types of problems they're not so bad so what we're going to do is we're going to set up kind of our table here and we're going to have two parts to it we got the material and we got the conversion and and so conversion something like that and we know that the materials obviously is pretty straightforward that's what's going to go into the stuff that the conversion remember is that's the stuff that goes into inventory that converts the material to the finished goods including the direct labor or the well the labor in the overhead okay so let's take a look at this we're going to break this out and we're going to start with the beginning to be completed so this is the stuff that was in you can think of it kind of it's still in the mixing pot whatever we're doing if we're making cookies it's still in the mixing department we haven't finished it it's in there as of the beginning of the month so we're trying to figure out how much of it needs to then be completed at this point in time so what needs to be done to it this month as it's already been started last month there's 20 000 units in there and we we're making the assumption that the materials are going to be in there at the beginning that's going to be a general assumption that's usually made they'll have to state that but usually that's going to be the assumption if it's in if there's something in process the material is already in there it's just the conversion we need to put in so we just got to kind of memorize for these types of problems that the beginning for this month it's going to be zero for the material again why because even though there's 20 000 units in there that all went into the process that we're working on last month therefore none of it is going into the process this month it was accounted for last month on the conversion half of it we're going to have to say okay how much of it was done completed in terms of direct labor and overhead and they're going to have to give us some kind of percentage on that and they're going to say that uh 62 percent was completed last month therefore how much was completed this month it's going to be equal to 100 percent minus 62 or 1 minus 0.62 so if I hit enter and I'm going to go up to the home tab and add decimals it's 48 I mean 38 percent if we add the percentage 38 percent so if 62 was completed last time what do we got to do this time we have to finish it we have to complete the remaining 38 percent of conversion to finish up the product so we're going to say of those 20 000 units times the 38 we have equivalent units of 7006 that we're going to do this month and then we're going to break this out by the start and complete units the units that we started and completed and in this case they actually just gave us that number they're going to say that the beginning of the month and we had 180 that were started and completed sometimes they give us the amount that was transferred out and we have to take that number and subtract the beginning amount from it assuming that this was started but they just gave us the 180 this time 180 000 and if it was started and completed the whole point of us determining this number breaking it out separately is because we know that 100 percent of that equivalent units were started and completed so for both materials and conversion 100 percent of those are there for equivalent units then we've got the ending inventory that this is the stuff that's not quite complete yet and so we're going to say that at the end they say that 37 000 units are still in there now on the material side similar logic that we did up here where we said we're not going to do anything to the materials it's already in there in this case if we started it this time even if we haven't completed it that means that all the materials went in there because that's the first thing we do to start it if we're going to you know bake the cookies we put all the cookie dough in there first so that's already done as far as conversion if we started them this month they're all in there i mean as far as material if we start them and that's all in there as far as conversion we're going to have to say okay how much of the work is still done and how much is not done they're going to give us the amount that is done so 21 percent of it has been done this month that's what we're calculating therefore of the 37 000 total units times 21 percent completed with respect to conversion means that we have 7 770 equivalent units with regard to conversion so if we add these up then we're going to sum up the materials 0 plus 180 000 plus 37 000 gives us the 217 000 and the conversion equals the sum of 7600 plus 180 000 plus 7 770 gives us the 195 370