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Department M had 600 units 60% completed in process at the beginning of June, 6,000 units completed during June, and 700 units 30% completed at the end of June. Using the first-in, first-out method of inventory costing, the number of equivalent units of production for conversion costs for the period is a.5,850 units b.5,640 units c.6,700 units d.7,300 units

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Answer:

a) 5,850 units

Explanation:

Equivalent units are notional whole units which represent incomplete work and are used to apportion cost between work progress and completed work. These units are determined as follows:

Equivalent units = Degree of work done(%) × units of inventory

Under the first-in -first out  system, to account for the units completed in a period, it is assumed that the opening inventory units are first completed and the balance represents the newly introduced.

Fully worked = completed units - opening inventory

                      = 6,000 - 600

                      = 5,400 units

Items                           Workings                   Equivalent units

Opening inventory    (100-60)%× 600              =  240

Fully worked                100% × 5400                =  5,400

Closing inventory        30% × 700                  =  210

Total equivalent units                                       5,850

= 240 + 5400 +210

=  5,850  units

Note the opening inventory has 60% work done last period so the balance of 40% i.e  (100 - 60)  is completed this period

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