Question

During August, a factory commenced work on 20 000 units. At the start of the month, there were no partly finished units but at the end of the month, there were 2000 units which were only 40% complete. Costs in the month were. $3 722 400.00.

What is the total value of fully completed output which would show in the process account

Answer 1

Answer:

Explanation:

Units completed = Units input - Closing units partly completed

                        = 20,000 units - 2,000 units

                       = 18,000 units

Equivalent units of closing units partly completed = Closing units partly completed x Degree of completion

                                                                                = 2,000 units x 40%

                                                                                = 800 units

Therefore,

Cost per unit = Total cost / (Units completed + Equivalent units of closing units partly completed)

                      = $3,722,400 / (18,000 units + 800 units)

   = $198 per unit

Total value of fully completed units = Cost per unit x units completed

   = $198 x 18,000 units

   = $3,564,000

Point to read -

Equivalent units means, how much finished units, will partly completed units results.