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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.

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Answer:

Equivalent unit = 47,300 units

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

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