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
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%.
