Answer:
Equivalent units = 3,855 units
Explanation:
Equivalent unit are notional whole units which represent incomplete work and are used to apportion cost between working in progress and completed work.
Equivalent unit is calculated as:
Degree of completion (%) × Units .
The equivalent units can be calculated by using either the first in first out (FIFO) or weighted average method.
Here, we will use the FIFO.
FIFO: Under this method, to account for the completed units of a particular period, it is assumed that the opening inventory units must first be completed. That is, the first set of completed units should be the opening inventory.
The table below has been set out for explanation:
Items Units Notes Workings Equiv.Units
Opening inventory 200 1 40% × 200 80
Fully worked 3,700 2 100% × 3700 3700
Closing Inventory 300 3 25% × 300 75
Equivalent unit 3,855.0
Notes
1. 60% work has already been done in the previous period (September) so in October the balance is done.
2. The fully work represents units of new work introduced in October and completed in the same period. The value is 3900- 200 = 3700
3. The closing inventory is the units of new work started in October but not yet completed at the end of October.
Equivalent units = 3,855.0
