Question

EUP (Equivalent Unit of Production): How is the underweighted average computed?

Option 1: By excluding the beginning work-in-process inventory.
Option 2: By considering only direct labor costs.
Option 3: By ignoring the units completed during the process.
Option 4: By focusing on the most expensive process.

Answer 1

The underweighted average for Equivalent Unit of Production is calculated by excluding the beginning work-in-process inventory. Only the costs incurred during the production process are considered.

Step-by-step explanation:

The underweighted average for Equivalent Units of Production (EUP) is typically computed by giving less weight to the beginning work-in-process inventory. This method acknowledges that the work-in-process inventory from the previous period may not have incurred the same production costs as the current period. The underweighted average aims to allocate costs more accurately to the units in the current period. So, the correct option is: Option 1: By excluding the beginning work-in-process inventory. This method focuses on the costs and units incurred and completed during the current period, providing a more accurate reflection of the costs associated with the current production process without giving undue weight to the beginning inventory.