Billings Corporation Uses the First-In, First-Out Method in Its Process

question 335

Multiple Choice

Billings Corporation uses the first-in, first-out method in its process costing system. On July 1, Department A had 10,000 units in process that were 80% complete with respect to conversion. On July 31 the department had 8,000 units in process that were 60% complete with respect to conversion. The department transferred 40,000 units out during the month, of which 10,000 units came from the beginning work in process inventory, and 30,000 units were started and completed during the month. All materials are added at the beginning of the process in Department A. What are the equivalent units of production for the month for materials and conversion, respectively?

• A) 38,000 units and 36,800 units
• B) 38,000 units and 38,000 units
• C) 48,000 units and 44,800 units
• D) 48,000 units and 48,000 units

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Definitions:

Fixed Assets

Long-term tangible property owned by a business that is used in its operations and is not expected to be consumed or converted into cash within a year.

Salaries Payable

The amount of salary expenses that have been incurred by a company but have not yet been paid to employees, classified as a liability.

Operating Activities

Day-to-day actions that relate to producing and delivering a company’s products and services, forming the primary source of revenue.

Future Cash Flows

Future cash flows refer to the estimated monetary inflows and outflows a company expects to receive or pay out in the future, playing a critical role in financial planning and analysis.