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March 24, 2020 at 12:23 pm
In Q.no. 25, shouldn’t we consider the opening inventory for the first month ? ( i.e in month 1 the total production would be 4300 total.)
And it’s closing inventory might be the opening inventory of month 2.
In that case , in month 2 absorption costing profit might come higher.
John Moffat says
March 24, 2020 at 3:00 pm
No. If you have watched my free lectures then you will know that if inventories increase then absorption costing gives the higher profit, whereas if investors decrease then marginal costing gives the higher profit.
In month 1 production is more than sales, and so the inventory must increase over the month. (The production is 3,900 as per the question – we certainly do not add on the opening inventory in calculating the production!!!!).
In month 2 production is less than sales, and so the inventory must decrease over the period.
It is of no relevance what the actual amount of inventory are in the question because we cannot possibly calculate the actual profits (there is not enough information). We can only decide which combination of profits is consistent (i.e. possible).
I do suggest that you watch my free lectures. They are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
September 13, 2018 at 10:15 pm
A company which operates a process costing system had work in progress at the start of last month of 400 units (valued at $3,000), which were 40% complete in respect of all costs. Last month 1,500 units were completed and transferred to the finished goods warehouse. The cost per equivalent unit for output produced last month was $20. The company uses the FIFO method of cost allocation.
What is the total cost of the 1,500 units transferred to the finished goods warehouse last month?
Total cost of finished goods can be calculated as:
Value of opening work in progress + value of work done in period on work in progress + value of work started and finished in the period
Total output = 1,500 units
Work in progress brought forward = 400 units
Work started and finished in the period = 1,100 (1,500 – 400)
Equivalent units brought forward as work in progress = 160 (400 x 0.4)
Value of work done in the period on work in progress = $4,800 ((400 – 160) x 20)
Value of work started and finished in the period = $22,000 (1,100 x 20)
Value of goods completed:
Value of opening work in progress = $3,000
Value of work done in the period on work in progress = $4,800
Value of work started and finished in the period = $22,000
Total = $29,800
This question is the same as the one you went through in the specimen exam no 21 and im plugging in the figures to each question the way you did it and im getting it wrong how is that? I have the exam on saturday a reply to this would be greatly appreciated.
September 13, 2018 at 10:17 pm
Could it be different as in the question i posted its asking for the total cost and in the question on the specimen exam its asking for the value or does this matter. The questions look absolutely identical its just one is asking for the cost and the other is asking for the value could you please clarify this please?
September 14, 2018 at 8:23 am
The questions are indeed virtually identical, and total value and total cost are the same thing.
The answer of $29,800 is correct (as is my answer to the question in the specimen exam). You must have made a mistake somewhere in your own workings, but it is impossible for me to know what you did wrong because you have not shown your own workings!!
April 19, 2018 at 5:35 pm
Why in q.27 we compare cost per unit for degree of completion? Not the actual number of units or total cost?
April 19, 2018 at 5:39 pm
Because that is what the question is asking for 🙂
Have you watched my free lectures on process costing? The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
December 31, 2017 at 3:13 pm
Thank you Sir for your lectures especially on specimen papers,I have now improved on how to tackle questions. Now ready to enter the exams.
January 1, 2018 at 9:11 am
Thank you for your comment 🙂
December 30, 2017 at 1:44 pm
for question 21 i thought the requirement was the cost required to complete the wip i.e 40% *300* $10 plus the 1880 units * $10. Would this be the answer if the question asked for costs incurred and not value of finished goods?
Also, thank you so much for these lectures
December 30, 2017 at 2:44 pm
Yes it would be the answer.
December 30, 2017 at 3:41 pm
thank you very much
December 31, 2017 at 7:41 am
You are welcome 🙂
May 22, 2016 at 8:40 am
Sir, for Section A Q. 22. How to understand the Standard hours for Actual production was 27000 hours? Doesn’t it mean that this month produced units actually need 2000 hours more than budgeted time to complete, yet company only spent 24000 hours to complete it?
May 22, 2016 at 9:51 am
The question actually says “the standard hours for actual production were 27,000”.
Therefore they must have produced more units than they budgeted on producing.
I do suggest that you watch my free lectures on variance analysis. Our free lectures are a complete course for Paper F2 and cover everything needed to be able to pass the exam well.
May 24, 2016 at 6:53 am
Thank you, Sir. I will re-watch the lecture again.
May 24, 2016 at 7:08 am
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