Answer:
Equivalent units
Materials= 40,000 units
Conversion= 36,000 units
Explanation:
Equivalent units are notional whole units which represent incomplete work and are used to apportion cost between work progress and completed work
Equivalent units = Degree of work done(%) × units of inventory
Conversion cost
<em>Item</em> <em> equivalent units</em>
Opening inventory 40% × 5,000 = 2,000
Fully worked units 100% × 30,000= 30,000
Closing inventory 40%× 10,000= <u> 4,000 </u>
Total equivalent unit <u> 36,000</u>
Notes
The following notes explains the computation of the items of equivalent unit for conversion cost:
1. DOC for opening inventory is 40% i.e 100%-60%. Remember that 60% work has been done in the previous period, so the balance is to be done in this current period
2. Fully work represent the units of inventory introduced in the current period and completed in the same period. Meaning 100% work was achieved in the period.
3. Closing work is only 40% completed. This represent work started this period but not yet completed.
Material cost
<em>Item </em> <em> equivalent units</em>
Opening inventory 0% × 5,000 = 0
Fully worked units 100% × 30,000= 30,000
Closing inventory 100%× 10,000= <u> 10,000 </u>
Total equivalent unit <u> 40,000</u>
Notes
The following notes explains the computation of the items of equivalent unit for Material cost:
1. DOC for opening inventory is 0% i.e 100%-1000%. Remember that materials are added at the beginning. Hence all the materials required for the opening inventory had been added in the previous period
2. Fully work represent the units of inventory introduced in the current period and completed in the same period. Meaning 100% materials was added in the period.
3. All the materials required for the closing inventory were added in this period, hence, 100% degree of completion was used
Equivalent units
Materials= 40,000 units
Conversion= 36,000 units
