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Arisa [49]
3 years ago
9

Magic Company adds materials at the beginning of the process in Department A. The following information on physical units for De

partment A for the month of August is available. Work in process, August 1 (60% complete with respect to conversion)72,000 Started in August480,000 Completed480,000 Work in process, August 31 (30% complete with respect to conversion)72,000 Required: a. Compute the equivalent units for materials costs and for conversion costs using the weighted-average method. b. Compute the equivalent units for materials costs and for conversion costs using the FIFO method.
Business
1 answer:
Dvinal [7]3 years ago
8 0

Answer:

Equivalent units

a) Weighted average =  523,200 units

b)  FIFO =  480,000 units

Explanation:

<em>FIFO Method.</em>

<em>Fully worked units</em><em>: These represent units of inventory that were started in a current period and completed that same period. The fully worked units are calculated in order to separate the opening inventory from  the the newly introduced when accounting for completed units under the FIFO.</em>

For magic company , fully worked units is

= 480,000 - 72,000 = 408,000 units

Equivalent units using Weighted Average

<em>Here, there are no distinction between opening inventory and the newly introduced</em>.

                                                            <em>            Equivalent Units</em>

Completed unit                    (100%× 480,000) = 480,000

Closing inventory                (60% × 72,000) = <u>     43,200</u>

Total equivalent units                                       <u>523,200</u>

Equivalent Units using FIFO

Item                                                               <em>Equivalent Units</em>

Opening inventory              (40% × 72,000) =  28,800

Fully worked                        (100%× 408,00) = 408,000

Closing inventory                (60% × 72,000) = <u> 43,200</u>

Total equivalent units                                     <u>480,000 </u>

<u />

Equivalent units

a) Weighted average =  523,200 units

b)  FIFO =  480,000 units

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