Question

Computing Equivalent Units of Production

Using the data given for Cases 1–3 below, and assuming the use of the average cost method, compute the separate equivalent units of production—one for materials and one for labor and overhead—under each of the following assumptions (labor and factory overhead are applied evenly during the process in each assumption):

Assumptions:

All materials go into production at the beginning of the process.

All materials go into production at the end of the process. (Note that this would have to be a department subsequent to the first department for all materials to be added at the end of the process.)

At the beginning of the process, 75% of the materials go into production and 25% go into production when the process is one-half completed.

Note that you will have three solutions for each of the following cases:

Case 1	—	Started in process 5,000 units; finished 3,000 units; work in process, end of period, 2,000 units, three-fourths completed.
Case 2	—	Opening inventory 5,000 units, three-fifths completed; started in process 40,000 units; finished 39,000 units; work in process, end of period, 6,000 units, one-fourth completed.
Case 3	—	Opening inventory 1,000 units, one-half completed, and 8,000 units, one-fourth completed; started in process 30,000 units; finished 29,000 units; closing inventory work in process 5,000 units, one-fourth completed, and 5,000 units, one-half completed.

		Equivalent Units
		Case 1	Case 2	Case 3
a.	Materials account
	Labor and factory overhead
b.	Materials account
	Labor and factory overhead
c.	Materials account
	Labor and factory overhead

Answer 1

CASE-1
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				0
Add: Units Started in Process				5,000
Total Units to account for:				5,000
UNITS TO BE ACCOUNTED FOR:
Units started and completed				3,000
Ending Work in Process				2,000
Total Units to be accounted for:				5,000
req-a: materiala in beginning of process
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	3,000	100%	3,000
Ending Work in Process			100%	2,000	75%	1,500
Total Equivalent units				5,000		4,500
Req-b: material used at the end
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	3,000	100%	3,000
Ending Work in Process			0%	0	75%	1,500
Total Equivalent units				3,000		4,500
Req-c: 75% material in beginning and 25% go when 50% complete
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	3,000	100%	3,000
Ending Work in Process			100%	2,000	75%	1,500
Total Equivalent units				5,000		4,500
CASE-2
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				5,000
Add: Units Started in Process				40,000
Total Units to account for:				45,000
UNITS TO BE ACCOUNTED FOR:
Units started and completed				39,000
Ending Work in Process				6,000
Total Units to be accounted for:				45,000
Reqa: material in the beginning of the process
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	39,000	100%	39,000
Ending Work in Process			100%	6,000	25%	1,500
Total Equivalent units				45,000		40,500
Req-b: material at the end of the period
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	39,000	100%	39,000
Ending Work in Process			0%	0	25%	1,500
Total Equivalent units				39,000		40,500
Req-c: 75% added in beginning annd rest at 50% completion
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	39,000	100%	39,000
Ending Work in Process			75%	4,500	25%	1,500
Total Equivalent units				43,500		40,500
Case-3
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				9,000
Add: Units Started in Process				30,000
Total Units to account for:				39,000
UNITS TO BE ACCOUNTED FOR:
Units started and completed				29,000
Ending Work in Process-50%				5,000
Ending Work in Process-25%				5,000
Total Units to be accounted for:				39,000
Reqa: material in the beginning of the process
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	29,000	100%	29,000
Ending WIP-50%			100%	5,000	50%	2,500
Ending Work in Process-25%			100%	5,000	25%	1,250
Total Equivalent units				39,000		32,750
Req-b: material at the end of the period
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	29,000	100%	29,000
Ending Wip-50%			0%	0	50%	2,500
Ending Work in Process-25%			0%	0	25%	1,250
Total Equivalent units				29,000		32,750
Req-c: 75% added in beginning annd rest at 50% completion
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	29,000	100%	29,000
ending Wip-50%			100%	5,000	50%	2,500
Ending Work in Process-25%			75%	3,750	25%	1,250
Total Equivalent units				37,750		32,750
				CASE-1	CASE-2	CASE-3
a. Material				5000	45000	39000
a. labour and overheads				4500	40500	32750
b. material				3000	39000	29000
b. Labour and overheads				4500	40500	32750
c. material				5000	43500	37750
c. Labour and overheads				4500	40500	32750