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Anyone, please help me with the following question justified by strong explanation:
Vare produces 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 1000 Units
Units Finished 800 UnitsThe degree of completion quoted relates to labor & overhead cost. 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 material in the period?
A) 1250
B) 1000
C) 850
D) 680You must have an answer in the same book in which you found the question. So in future please ask about whatever it is in the answer that you are not clear about and then I will explain.
The opening work in progress is more than 50% complete and therefore will already have all the material, so no extra material will be used on them in this period.
400 units were completed from start to finish in this period and so the will have 100% of the material – so 400 effective units.
600 units are in WIP at the end of the period – they are only 20% complete and so will only have 75% of the material. So 450 effective units.
So a total of 850 effective units.
The question says that 3/4 of the material is added at the start of the process (and 3/4 is 75%).
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