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Material 4000 units $16000 Finished goods 2750 units $____
Labour $ 8125 Normal Loss 400 units $ 700
Overhead $ 3498 Work in progress 700 units $____There was no opening work in progress (WIP). Closing WIP, consisting of 700 units, was complete as shown :
Material 100%
Labour 50%
Overhead 40%Losses are recognised at the end of the production process and are sold for $1.75 per unit.
Hi sir , I have problem solving the value of the closing WIP and the value of transferred finished goods. The question have an abnormal loss so i did that first and i found an abnormal loss of 150 units valued at $1121 by using the total cost minus normal loss divide total equivalent units, the cost per unit i found should be used for abnormal losses and finished goods right? But I got lost somewhere there, how do i solve the question if it has abnormal losses/gains and work in progress, how do i value the finished goods and closing WIP?
Thank you.
Anyone free please do give me a hand thank you very much ! The first part of the question is a process account
The unit cost is calculated as though the abnormal losses were actually produced.
So for materials, the cost per unit is $(16,000 – 700)/ (2,750 + 150 + 700) = $4.25
For labour, the cost per unit is $8,125 / (2,750 + 150 + (50% x 700) = $2.50
You should be able now to do the overheads yourself 🙂The total cost is then used to value both the finished goods and the abnormal loss.
The WIP is valued in the normal way.Have you watched my free lectures? The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
Surely there is an answer in the same book in which you found the question, and in future you should ask about whatever it is in the answer that you are not clear about.
(If you do not have an answer because you have been set it as a test, then we do not do your homework for you 🙂 )The examiner has said that you will not be asked questions that have losses and WIP in the same question. However, I suppose this one is OK because the losses only occur at the end of the process.
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