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Hi John,
Can you help clarify this question:
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% completeUnits started 1,000
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 company uses the FIFO method of cost allocation.What are the equivalent units of production for materials in the period?
Answer: 850
I understand that 400 units were started and finished for the period but confused about the calculation for the equivalent units for the opening WIP (400×0%) and calculating the equivalent units for the closing WIP (600×75%). If they have added 75% material at the start and then another 25% half way through, should the materials not be 100% complete by the end of the process?
The opening WIP are more than 50% complete and so all of the materials will already have been aded and no. more are needed in this period.
The closing WIP is less than 50% complete and so only 75% of the material will be included.
Thanks John, I was confusing myself with the 50% complete part and missed the 60% and 20% complete for opening and closing WIP. Makes sense now you have explained.
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