Please explain:
WIP in a continuous manufacturing process was over estimated, what effect would correction of the error have in the period on the following:
1) cost per equivalent unit
2) total cost of output completed
FIA Forums
Cost Analysis
Since the WIP is overestimated, therefore:
Before the correction;
WIP increases, cost per EU decreases (because there are lot of WIP in there, so the total cost divides by EU will give you less amount of cost per EU), thus, total cost of output decreases
Correction;
WIP decreases, cost per EU increases, thus, total cost of output increases
Can anyone solve this
Where variable cost changes after a certain activity
Units Cost
12000 64000
18500 84000
Variable cost per unit decreases by $0.5 when activity level exceed 15000 units.Total cost of 20000 units would be :
Sign into reply to this topic.