Vare produces various inks at its Normanton factory. Production details for Process 1 are as
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.
What are the equivalent units of production for materials in the period?
Please solve above question and give some trick if possible
You have to read the question carefully: What are the equivalent units of production for MATERIALS in the period?
Production in the period is:
Completion of opening WIP + Started AND finished units + Closing WIP (i.e. started but not finished)
Using the information provided, the respective numbers are:
400 + 400* + 600
* is derived (of the 800 unit finished, 400 were in opWIP, or, alternatively of 1,000 started, 600 were unfinished)
The % completions for op/cl WIP relate to labour and overheads - not material. 3/4 (75%) of materials goes in at the start of the process - and the remaining 25% when the process (as shown by labour and o/head %s) is 50%.
So, for materials, equivalent units are:
0 + 400 + 600 x 75% = 850
In other words - opWIP was already complete with respect to materials, because 60% > 50% - so EU for materials in the current period is 0. And cl WIP has 75% of materials, because 20% < 50%.