Question

The ending inventory was 85% complete with respect to materials and 75% complete with respect to conversion costs. How many units are in ending work in process inventory in the first processing department at the end of the month?

Answer 1

Answer:

Equivalent units:

Direct Materials: 85

Conversion Costs: 75

Explanation:

Hey there!

You must calculate equivalent units. Let's assume we have no opening inventory and that we start the porduction of 100 units. Also no units are completed in this period.

                                    Equivalent Units  

                                           Physical             Direct           Conversion

                                                     Units                   Materials         Costs

Work in process, beginning          0  

Started during current period 100  

To account for                         100  

Work in process, ending         100  

(100 × 85% respect to materials;

100 × 75% respecto to conversion costs)            85                     75

Equivalent units of work done in current period    85              75

Because 75% of conversion costs incurred on 100 incomplete units could have been incurred to make 75 (0.75 x 100) complete units by the end of the month. That is, if all the conversion-cost input in the 100 units in inventory had been used to make completed output units, the company would have produced 75 completed units (also called equivalent units) of output.

The same reasoning can be done using direct materials.