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  2. Hey tutor,

    If you are only 60% completed making 200 units – and therefore its the same as 60 finished units – can’t you just do the equivalent units x the cost per unit for labour and overheads instead?

    so rather than doing 200 x 60% (0.6) x 3 = $180 – can’t you just do 60 x 3 = $180

  3. why do you not find the total cost per unit by doing:
    total cost incurred/ number of units made

    (so in the lecture example it’s 5000+2760+3440/ 1000 units)

    and rather have to add the conversion cost per unit and the material cost per unit?

  4. Hi John,

    Fantastic resources! And free of charge, unbelievable!

    I can’t get my head around something in this lecture. It’s when you work out the CPU for mats,lab, and o/h’s. I keep thinking, are you allowed to just add an 1780 extra units to total units, when working out the CPU?

    I’ve put it into a spreadsheet to see what I don’t understand. Please can you have a quick look? I’d really appreciate it

    Costs Units
    Materials £ 5,000.00 1000
    Labour £ 2,760.00 –
    Overheads £ 3,440.00 –

    £ 11,200.00 1000

    Cost per unit £ 11.20

    Materials Labour Overheads
    Cost £ 5,000.00 £ 2,760.00 £ 3,440.00

    Finished 800 800 800 2400 units?
    Starting WIP 200 120 60 380 units?

    Total Units 1000 920 860 2780 units?

    Cost Per Unit £ 5.00 £ 3.00 £ 4.00

    I understand that equivalent units represent a proportion of the full finished unit, but by doing so makes total finished units, and cost basis appear over inflated? Do you see my logic?

    Much Appreciated
    Alex

    • I don’t really see your logic 🙂
      The whole idea is to spread the costs over all the work that we done – completing WIP, making some units in full, and starting the closing WIP.
      It is not over-inflating the costs. The total cost of the finished goods and the WIP is equal to the costs expended during the period.

  5. Hello, Perhaps I am not understanding correctly, but it seems as though if you value the WIP into the costing for the finished goods then you are under valuing the finished goods.

    Why instead were the finished goods not valued as such:

    MATS: $5,000/800 = $6.25
    LAB: $2,760/800 = $3.34
    O/H: $3,440/800 = $4.30

    Cost P.U for finished goods =$13.89

    your original costing goes on to make even less sense to me, in the valuation when you

    value the WIP as a percentage of the labor and O/H cost yet again instead of the full $3

    and $4 which already accounted for the 60% and 30% WIP respectively.

    Please explain. thankx!

    • Money had been spent on part-finishing the work-in progress and so some of the 2760 for labour and the 3440 for overheads was spent on the WIP. It would therefore be wrong to give all of those costs just to the finished goods. The WIP needs to be valued at the cost of the work done in getting them part finished.

      I do suggest that you watch the lecture again.

  6. Thank You very much Sir for your effort to make us understand every subtle bit of information in our study. I am planning to do my exams in probably 2016/2017, therefore will are these lectures up to date or are there any updates to this?

    Thank you

  9. Hello Sir,
    I’m trying to access your video lectures on process costing work in progress. Whenever I open those videos I instead get “Demand and Supply Curves” lectures. I really don’t know why. I’ve tried it from different browsers and even my cellphone. But the problem persists. Not only process costing but also the further more chapters. The title displays a specific name and I get videos displayed for some other chapter. Please help me. Thankyou so much.

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