Question

Indigo Devices Corp. has 25,000 units in process on September 1 that are 70% complete. In September, the company completed and transferred out 60,000 units. The company has 12,000 units in process on September 30 that are 40% complete. Calculate the equivalent units of Indigo Devices for September assuming the company uses the FIFO method of costing.

Answer 1

Equivalent unit = 47,300 units

Step-by-step explanation:

The FIFO separates the completed units into opening inventory and fully worked

Fully work represent units started and completed in the same period. They exclude the opening inventory.

Fully worked = 60,000- 25,000 =175,000.

Item units Equivalent units

Opening inventory 25,,000 25,000× 30%= 7,500

Fully worked 35,000 35,000× 100% 35,000

Closing inventory 12000 12,000 × 40% = 4,800

Total equivalent unit 47,300

Equivalent unit = 47,300 units

Note also at that the degree of completion for opening inventory is the simply the balance of work remaining to be done.

For example, for materials, 70%% of work has been done on the opening inventory in the last period, hence the balance of 30% would be done this period