In Order to Compute Equivalent Units of Production Using the FIFO

question 10

Multiple Choice

In order to compute equivalent units of production using the FIFO method of process costing,work for the period must be broken down to units:

• A) completed during the period and units in ending inventory.
• B) started during the period and units transferred out during the period.
• C) completed from beginning inventory,started and completed during the month,and units in ending inventory.
• D) processed during the period and units completed during the perioD.
• In theory the physical flow dictates the cost flow: (1)complete the units in beginning inventory, (2)start and complete new units,and (3)start,but don't complete the balance of new units.

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Definitions:

Direct Labor Hours

The total hours of labor directly involved in producing goods or providing services, used in calculating labor costs and efficiency.

Period Costs

Expenses on the income statement not directly tied to the production of goods, such as administrative and selling expenses.

Conversion Costs

The sum of labor costs and overhead expenses associated with transforming raw materials into finished goods.

Factory Overhead Costs

All the indirect costs associated with manufacturing, excluding direct materials and direct labor costs; includes costs such as maintenance, utilities, and rent.