Question

Assembly department of Zahra Technologies had 100 units as work in process at the beginning of the month. These units were​ 45% complete. It has 200 units which are​ 20% complete at the end of the month. During the​ month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses​ weighted-average process-costing method. What is the total equivalent units in ending inventory for assignment of direct materials​ cost?

Answer 1

Total equivalent units 540 units

Step-by-step explanation:

Equivalent Units E.U) are notional whole units which represent incomplete work and are used to apportion costs between between work in progress and completed work.

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

To compute the EU as follows:

Equivalent Units = Degree of completion (%) × units

Item unit Equivalent unit

Transferred out 500 (100%×500) = 500

Closing WIP 200 (20%× 200) = 40

Total equivalent units 540