# Process Costing – Work-in-progress (part c)

1. says

Sir, there is one thing I don’t understand, in calculating the closing WIP for July (5000 units), why did we apportion the overhead cost (50%) whereas, we took the full overhead cost while calculating the Opening WIP.

• says

Because we are using the weighted average cost approach. The value of the opening WIP includes part of the cost of producing units that were finished this period and the money spent this period includes the cost of finishing those units.

However, the closing work in progress can only possibly include 50% of the cost if we have only done 50% of the work.

(If we were using FIFO then because we only look at this periods cost, then it does only include the cost of finishing the opening WIP)

2. says

if the question(where we hv o.inventory) does not tell you which method to use(either fifo or avco),which one do we use?

• says

It depends what information you are given.

For FIFO, you need to know the % complete for each cost in the opening WIP. If you are not given this then you cannot do FIFO and it has to be AVCO.

For AVCO, you do not need the % complete, but you do need to know the value of the opening WIP split between the individual costs (materials, conversion costs etc.). If you are not given the values then it cannot be AVCO and it has to be FIFO.

(If you are given all of the above information, then the question will specify whether it is FIFO or AVCO)

3. says

I am trying to complete question 9 in Chapter 12 of the lecture notes. It does not show in the answer how the answer is got. Can you please advise me how this is done?

• says

Because we are using FIFO we need to know how many units were started and finished during the period.
It is 12,000 units. (14,000 were finished, but 2000 had already been started in the previous period).

Then we need to know the cost per unit for materials and for conv costs.

For materials, WIP is always 100% finished for materials, and so we spent \$51,000 on 15,000 units (opening WIP needed no more materials; 12,000 with full work need full material; 3,000 closing WIP need full materials)
So the cost per unit for materials is \$51,000 / 15,000 = \$3.40.

For conversion cost, we spent \$193,170. The effective units were: finishing the WIP – 40% work this period to finish opening WIP of 2000 units is 800 units. Done completely 12,000 units. 30% work this period to start the 3000 closing WIP is 900 units.
So total effective units is 800 + 12000 + 900 = 13,700
So the cost per unit for conv costs is 193170 / 13700 = \$14.10

Finally, to value the closing WIP:

Materials: 100% finished so 3,000 units x \$3.40 = \$10,200
Conv costs: 30% finished so 3,000 units x 30% x \$14.10 = \$12,690

Total = \$22,890

4. says

Oh! I cant waiting to destroy this exams on 11th December 2013. My body is aching me for a distinctive pass. thanks to OT team

5. says

Hello greetings teacher, there are no lectures of job batch and service costing? There is a chapter in the text book.

• says

They do not need separate lectures. The thinking needed is covered in the other lectures.
Have a read of the chapter in your text book and you will see what I mean.

6. says

you are such generous people to do it all free. i wonder if adverts make you enough for living. to support the site i will definatly visit adverts. I am very very thankful to the whole open tuition team. if i pass, the credit is your. Best wishes.

7. says

in the exam can we use the method which we feel is easier ? as avco is easier then fifo
does it mention the paper which method to use?

8. says

Hye I am in Pakistan so can I do my preparation for ACCA from opentuition lectures and notes.Are the papers and syllabus that are made for acca same all over the world?