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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.The equivalent units of production for materials in the period are:
A 1,250
B 1,000
C 850
D 680hi, I really need your explanation in detail why we have to multiply the cwip units with 75%. i just did not get the idea how the process works. thank you
In future you must ask in the Ask the Tutor Forum if you want me to answer. This forum is for students to help each other.
Given that the closing WIP is less than 50% complete for labour and overheads, they will only contain 75% of the materials (because 75% is added as soon as they were started but the rest is only added when they are 50% complete for labour and overheads).
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