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Care produces various inks at its Normanton factory.Production details for Procees 1 are as follows 🙂
Opening work in progress 1 April. 400 units. 60% complete
Closing work in progress ,30 April 600 units 20%completeUnits 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 co uses the fifo method of cost allocation.
What are the Equivalent units of prodn for materials in the period ?
Answer is 850
How do we solve this
TIA
Because the opening WIP was already more than 50% complete it will already have all the materials and so no more will be added in this period.
The 800 – 400 = 400 new units that we finished this period will have had all of the materials this period.
The 600 units of WIP are less than 50% complete and therefore they will only have had 3/4 of the material this period and so the effective units are 600 x 3/4 = 450.
So the total effective units are 400 + 450 = 850.
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