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To whom it may concern,
I have a question that requires your urgent attention. The question is as follows:Vare Ltd produces inks at its Normanton factory. Production details are as follows:
Opening work in progress: 400 units 60% complege
Closing work in progress: 600 units 20% complete
Units started: 1000
Units finished: 800The degree of completion quoted relates to labour and overhead costs. Three quarters of the materials are added at the start of the process and the remaining quarter added when the process is 50% complete.
The equivalent units of production for the period are:
A. 1250
B. 1000
C. 850
D. 680Are you sure that you have copied the full question? The reason I ask is that the equivalent units for materials and for conversion costs are different.
First, for both of them, there are 400 units that were made completely in this period. (1000 were started, but 600 were still in progress at the end; alternatively 800 were finished, but 400 of them were already in progress at the start).
So, first for materials:
The opening WIP were 60% complete and there already had all the materials. So no extra materials needed this month.
The 400 made completely need full 100% materials – 400 equivalent units.
The closing WIP were only 20% complete, and therefore only had 75% of the materials, so the total equivalent units are 75% x 600 = 450.
So the total equivalent units are 0 + 400 + 450 = 850 units.Now conversion costs:
The opening WIP are 60% complete, so this period we need to do the remaining 40% work. So the equivalent units are 40% x 400 = 160 units.
Then we make 400 completely – so 400 equivalent units.
Then we start the closing WIP and do 20% of the work – so 20% x 600 = 120 equivalent units.
So the total equivalent units for conversion costs are 160 + 400 + 120 = 680 units.I am hoping that the question makes it clear whether they want equivalent units for materials or for conversion costs.
If they really do not, then although I think it unfair, I would use the equivalent units for materials (i.e. 850 units)I hope that helps 🙂
Oh dear it seems that I left out a crucial word, it seems that they wanted equivalent units for materials. Pardon me for making you go through all that trouble Sir John Moffat, as I was typing out this question right before my FMA Progress Test. I really appreciate your help. Oh and sir, I scored 94% on my FMA test today! Credits to you sir.
It is no problem at all 🙂
And many congratulations on passing your FMA (especially with such a high mark) – that is great news and I am very pleased for you.
Why thank you sir, although it was only a progress test. I hope that my finals turn out in such a favorable manner as well. Thank you for your contribution (pun intended) xD Jokes aside, I really really appreciate your help and guidance sir. Without you, I may have given up hope on Management Accounting. Your lectures are very enlightening. May your good deeds let you reap happiness. God bless!
Thank you very much for your comments, and best of luck with your finals.
I DON’T UNDERSTAND WHERE THE 75% CAME FROM, I AM SERIOUSLO LOST HERE.CAN YOU FURTHER EXPLAIN PLEASE.
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