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If the qn states that opening work in progress is 30% complete with regard to material cost and 25% complete with regard to labour and OH costs; closing wip is 75% complete with regard to material cost and 50% complete with regard to labour and OH costs.
Given: costs incurred during the month: DM cost: 241, 250 and OH: 135,000
Materials 1 May: 25,000
Materials 31 May: 30,000WIP 1 May 2012:
DM: 10,000
Direct Labour and OH: 6750How do you get the equivalent units for May?
Quite confused because usually they state 50% of the WORK and not the COST is completed.Thanks!
Woops, sorry.
If the qn states that opening work in progress is 30% complete with regard to material cost and 25% complete with regard to labour and OH costs; closing wip is 75% complete with regard to material cost and 50% complete with regard to labour and OH costs.
Given: costs incurred during the month: DM cost: $241, 250 and OH: $135,000
Materials 1 May: $25,000
Materials 31 May: $30,000WIP 1 May 2012:
DM: $10,000
Direct Labour and OH: $6750How do you get the equivalent units for May?
Quite confused because usually they state 50% of the WORK and not the COST is completed.
Thanks!
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The question does not appear to be complete. Can you please post the actual question?
The number of units involved is not given without which equivalent units can not be calculated
It doesn’t matter whether ir gives a percent of work or a percent of cost – it means the same thing.
As rehmanvohra has said, the question does not seem to be complete because you make no mention of how many units are in progress and how many units are started or completed.
Also, you need to know whether they are using FIFO or average cost.Sorry I just put up the part of the question I didn’t get, below is the whole question, would be so grateful if you could help.
P is a cosmetics manufacturer, if manufactures a single product in a single stage production process. It is the 1st of April 2012, and you have commenced a new job as management accountant for P.
Amongst the data, you discover the following details for P’s production for the month of March 2012:
Opening WIP: 10,000units
Complete: 40,000 units
Closing WIP: 15,000 unitsP uses the FIFO basis of stock valuation. Opening work in progress is 30% complete with regard to material cost and 25% complete with regard to labour and OH costs; closing work in progress is 75% complete with regard to material cost and 50% complete with regard to labour and OH costs.
Costs incurred during the March: Direct Material cost: $241, 250 and OH: $135,000
Additional information for the month of March
Materials 1 March: $25,000
Materials 31 March: $30,000Work in Progress 1 March 2012:
DM: $10,000
Direct Labour and OH: $6750a) compute the equivalent units of P for March
b) calculate cost per equivalent unit for March
c) compute the cost of completed and unfinished production for March
d) prepare the schedule of cost of goods manufactures of P for the month of March.For materials, the equivalent units are 30% x 10,000 (to finish the work in progress at the start) + 30,000 (the number of finished units that were completed in full – 40,000-10,000) + 75% x 15,000 (to start the work-in-progress at the end).
This gives a total of 44,250 equivalent units for materials. (You can repeat the same exercise to get the total equivalent units for labour & overheads).The cost of materials used in March is 241,250 + 25,000 – 30,000 = 236,250. (adjusting what was bought for the opening and closing inventories)
Therefore the cost per equivalent unit for materials is 236,250 / 44,250 = $5.34 per unit.
In a similar way you can calculate the cost per equivalent unit for labour and overheads (you should get $0.15 per unit).
Completed production is valued at: value of WIP at start + cost of finishing WIP + cost of completing the extra 30,000 this month (the cost of finishing the WIP and the cost of the extra 30,000 being at the prices calculated above).
Closing WIP is values using the prices calculated above,
Ooops – sorry 🙁
I must have been answering too fast 🙁Yes. For materials:
70% work to finish the WIP at the start = 70% x 10,000 = 7,000
Finished completely: 30,000
75% work to start the closing WIP = 75% x 15000 = 11,250So in total: 7,000 + 30,000 + 11,250 = 48,250 equivalent units
Giving a materials cost per unit of 236,250 / 48,250 = $4.90
Thanks Martynas 🙂
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