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Hello Sir,
I have a problem with the following question
Vare produces various inks at its Normanton factory.
Production details for Process 1 are as follows:Opening work-in progress, 1 April 400 units 60% complete
Closing work-in-progress,30 April 600 units 20% complete
Units started 1,000
Units finished 800
The degree of completion quoted relates to labour and overhead costs.Three-quarters of the material are added at the start of the process and the remaining quarter added when the process is 50% complete.The company uses the FIFO method of cost allocation
What are the equivalent units of production for materials in the period?
A)1250
B)1000
C)850
D)680Sir my answer was D but the Textbook said C
This is how I got my answer
60% was already completed for opening work in progress
so 40% needs to be completed40%*400=160
Units start to finish =Units started-closing work in progress
=1000-600
=400Closing work in progress
=600*20%
=120Therefore equivalent units=160+400+120
My answer =680Sir please correct where I went wrong and how to get the answer for this
I also don’t understand what to do with the information about “three quarters of the material are added at the start of the process and the remaining quarter added when the process is 50% complete”Overall this is my doubt sir
I hope you reply to this and explain me how to do this question
Thank YouThe question specifically says that the degree of completion relates to labour and overheads, but it asks for the equivalent units for materials.
Given that 75% is added when the process is started and the other 25% is added when 50% complete, the opening work in progress is already 100% complete for materials (because the labour and overheads are more than 50% complete).
As far as the closing WIP is concerned, since the labour and overheads are only 20% complete, it will only have 75% of the materials.
Sir thank you so much
But I have just one more problem to clarify in the questionWhen it says”Three-quarters of the material are added at the start of the process”
Doesn’t that usually refer to the opening work in progress
How could you place 75% also into the closing working progress(because closing work in progress is at the end of the month and not at the start ryt)
I’m a bit confused there
Could you please explain that for me also if you don’t mind ?It refers to all of the units, not just the WIP.
The closing WIP will have had 75% of the materials as soon as work was started on it. However because less then 50% of the labour and overheads have been done, it will not have had the remaining 25% of the materials.
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