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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 materials 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 1,250
B 1,000
C 850
D 680> I am not able to comprehend the information about the materials. What does it mean by ‘Three?quarters of
the materials are added at the start of the process and the remaining quarter added when
the process is 50% complete’? Please help me outThe opening working process is 60% complete for labour and overheads. Given that this is more than 50%, it means that they will already have all of the materials.
The closing working progress is only 20% complete for labour and overheads. Given that this is less than 50%, it means that they will only have 3/4 (i.e. 75%) of the materials.
So the effective units this period for materials are:
For the opening work in progress: 0 (because they already have all the materials).
For units started and finished in this period: 400 units (started 1,000 less closing WIP 600)
For the closing WIP: 450 units (75% x 600)The total is therefore 850 effective units.
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