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Imagine a bicycle factory, whose accounting period ends on the last day of the month.
During the month, 1000 completed bicycles were made.
There are 200 partially complete bicycles on the last day of the month.
However, all the materials are there in the factory, they just haven't been put together yet!
Problem 1: The factory supervisor estimates that they are, on average, half complete. How many equivalent units are there in terms of:
a) Direct Material costsb) Conversion costs
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