Answer:
Equivalent units:
Direct Materials: 85
Conversion Costs: 75
Explanation:
Hey there!
You must calculate equivalent units. Let's assume we have no opening inventory and that we start the porduction of 100 units. Also no units are completed in this period.
Equivalent Units
Physical Direct Conversion
Units Materials Costs
Work in process, beginning 0
Started during current period 100
To account for 100
Work in process, ending 100
(100 × 85% respect to materials;
100 × 75% respecto to conversion costs) 85 75
Equivalent units of work done in current period 85 75
Because 75% of conversion costs incurred on 100 incomplete units could have been incurred to make 75 (0.75 x 100) complete units by the end of the month. That is, if all the conversion-cost input in the 100 units in inventory had been used to make completed output units, the company would have produced 75 completed units (also called equivalent units) of output.
The same reasoning can be done using direct materials.
