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% 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? A 1,250 B 1,000 C 850 D 680
Someone please tell me how to solve this problem, a trick will also be helpful..
the opening WIP is already 60% complete and so they already have all of the materials (they are more than 50% complete) and so no extra materials are needed for them. The new units started (and finished) are 1,000 – 600 = 400, and they will have all (100%) of the materials. The closing WIP is 20% finished and so will only have 3/4 of the materials, so the effective units are 3/4 x 600 = 450
So the total effective units are 400 + 450 = 850.
