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F2 Chapter 13 Questions

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  1. question 3

    how is the input 15000
    it should be 15700

    Opening balance WIP (60% completed of 2000 units) : 800 (40% of 2000)
    Total Units completed : 14,000
    Closing WIP (30% completed of 3000 units) : 900

    Total : 15,700

    can you please explain where i am going wrong

    • The answer certainly should not be 15,700.

      14,000 units were completed – these must include the 2,000 units that were in progress at the start of the period and have simply been finished in this period (the materials were already there and only the conversion costs were not finished).

      In addition, 3,000 units were started – they had the full materials (as the question says) – and so in total 15,000 units (14,000 – 2,000 + 3,000) must have been input.

      (The equivalent units are of no relevance – they are not asked for, and are only relevant when calculating the unit costs.)

      I assume that you watched the free lecture on this before attempting the test?

  2. For question number 5 why was closing WIP the difference between the amount transferred in and the amount transferred out? Also, I understood why the $2.50 would have to be multiplied by the difference but not the other two dollar values. Can you explain?

    • If 13,500 units were transferred in, but only 11,750 were transferred out as finished, then the rest of them must still be being worked on i.e. work-in-progress.

      The 2.50 only relates to the labour and overheads, the full cost of the WIP has to include the materials as well.

      Did you watch the free lectures before attempting the test?

      • Hi John,

        I’m also confused by Q4 and the explanations you have written haven’t made it clearer.

        What confused me is that I first drew out a T account as:

        DR – Op WIP 2000
        – Units completed 14,000.

        Balancing total 16,000.

        CR – Closing WIP 3000.
        – (missing value) Finished goods, 13,000 ??? ( if it was 12,000, surely there is a missing balancing figure of 1,000? and the question states no loss occurred)

        Balancing total 16,000.

        I do understand that 2000 is from the previous month therefore 12,000 was produced this month, but the T account has thrown me off. Can you please explain?

        Hope my questions makes sense.

        thanks

      • In our workings, we need to separate the 14,000 completed into those that had full work done on them this period (12,000) and those that only had part work done to finish them this period (the 2,000 that were already in progress). It is only for the workings, but since only part work was done to complete the opening WIP, the effective units for this is lower.

        I assume that you watched my free lectures before attempting the test, and I do stress in the lectures the importance when doing FIFO of identifying how many were started and finished during the period.

    • $51,000 was spent on materials.

      The opening work on progress was already fully complete for materials and so no more was spent this period.
      Of the 14,000 completed this period, 20,000 of them were WIP at the start, so only the remaining 12,000 had materials this period.
      The 3,000 closing WIP were fully complete for materials.
      So the total equivalent units = 12,000 + 3,000 = 15,000.

      Did you watch the free lectures on this before attempting the test?

      • But the question says that all materials are input at the start of the process (which is usually the case). So for materials the WIP is 100% complete. It is only the conversion costs (i.e. labour and overheads) that are only 30% finished.

  5. Q4, are we just to assume that OWIP is 100% manufacturing cost covered from previous period and that CWIP is 100% manufacturing cost to current period. This information is omitted from the question.

    The question also states “degree of completion”. This is confusing, as it doesn’t state if this is for Conversion and/or Material costs. Because the manufacturing costs are omitted, it would only be natural to assume they % of completion is for both.

    • It is not omitted from the question at all – if it says all the material is input at the start of production then all means 100%. What else could it possibly mean?!!
      As a result, the degree of completion must refer to the conversion costs.

      Read my answer to the question below. You are going to have to get used to the wording – this was an actual past exam question!!

      And if you haven’t watched the free lectures then do. The examples I work through are exactly the same – just because they say the same thing using different words does not make them different questions 🙂

  6. Hello tutor. With regard to question 4 of the practise question, you know from the f2 lectures when we were given opening work in progress, we were told that material was how much completed, as well as conversion costs relating to work in progress. What confuses me in question 4 is that we are told that materials are in put at the beginning of the period,this does not give me any picture as to what completed percentage is of materials on the opening work in progress as well as closing WIP,I read from the previous comment that we assume that we have all the desk at the beginning, so does that mean we have 100% completed materials on opening and closing WIP?,so will that mean that the degree of completion here only refer to conversion costs? And what does it imply that conversion costs are incurred evenly during the process, please make an example, there was not such in lectures, because even if they are incurred evenly we are still told this percentage completion which I assume relates to conversion costs.

    • It is exactly as I do it in the examples in my lectures, so I am certainly not going to make another example 🙂

      Saying that ‘all’ of the materials are put in at the start means 100% is put in at the start – ‘all’ means everything i.e. 100%!
      (and it is perfectly logical – if you were making a desk (for example) is it not likely that you would have all of the wood (the materials) right from the start and that therefore if it was not finished (i.e. work in progress) that it was the work putting the wood together (i.e. the conversion costs) that were not finished? 🙂 )

      The fact that the conversion costs are incurred evenly is what we always assume. So if (for example) it was 40% finished then it must have 40% of the costs – that is assuming that the costs were incurred evenly, otherwise 40% finished would maybe not mean 40% of the costs.

      • Ohk it brings some light.English is my second language?.Please consider the following in relation to my previous question also.
        Avarage (Pty)ltd is a small publisher of quality textbook for wide range of subjects.During the month of July 2015,a special order was received for 100 textbook was received for the next three months.Production on textbooks was scheduled as follows:
        Textbook started.July 2015(40000) , August 2015(35000),September 2015( 25000)

        Incomplete textbook at month end(proportion complete)July 2015(10 000)30%,August 2015(5000)95%,September(NA)

        All textbooks are produced via a standardised process below.
        Raw Materials.
        A the start of the process,the paper to be printed on(which comprises 20% of the material cost each month) is fed into the printing press.As the paper passes via the printing press,the text is printed onto the paper.The ink(which comprises 50% of the raw materials cost each month)used to performe this is considered to be incurred evenly throughout the process.Finally, at the 90% of the way through the
        process,the hard outer covers of the book as well as binding are added.These comprises the remainder of the raw materials costs each month.
        Labour and overheads
        These costs are considered to be incurred throughout the process.
        REQUIRED
        Calculate the equivalent production units of raw materials for the 3 months assuming the company uses weighted average method.You should present a single number for each paper, which incorporate the paper,ink and outer covers.

        Please help.

      • You must ask this sort of question in the Ask the Tutor Forum, and not as a comment on a lecture (and since you must have an answer in the same book in which you found the question, you should ask about whatever it is in the answer that you are not clear about).

        (However this question could not possibly be asked in the exam!! You should be using a Revision Kit from one of the ACCA approved publishers – they contain lots of exam standard questions in the same format as in the real exam.)

    • 1. 12,000 are the number of units that were started and finished during the period and therefore had 100% of the work done on them.

      2. Because part of the cost is the material included.

      You really should watch the free lectures on Process Costing before attempting the the test – this is all explained in the lectures.

      • i rewatched the lecture, but still don’t understand the question 5, in the lecture when calculate the wip valuation, only use the quivalent units X materail cost, so in the question 5 materail cost is 4.5+1.25?

      • Agnes: Correct. 14,000 units were finished. 2,000 units had already been started (the opening WIP). So only the remaining 12,000 units were done from start to finish.

  9. Ive been trying to work this out and cant 🙁 you know the material cost is the 12000 plus the 3000? how come the 2000 at the start doesnt get any? is that because from the previous period it had 100% of materials used on it at the start of that process as well? i feel like ill never remember that for the exam and am worried about it

    • ‘all materials are input at the commencement of the process’ so do you assume that for every single time it happens, 100% is used on the end work in progress as well for each one. i kept going to it and trying to put a material cost on it.

      • You have not said which question you are referring to!!

        Have you not watched my free lectures on process costing? We always assume that 100% of the materials are input as soon as units are started unless the question specifically says different.

        Think about it. If you were making a desk then surely you would normally have all the wood there right from the beginning. If some desks are still in progress then it will be the labour etc that has not been finished – they will not have finished putting all the wood together.

      • Sorry, I didn’t realise the comments were only relevant to the flash part above and not each question. I meant question 4 of 6. Yes I have watched them, I’m just learning. OK thank you.

  10. Hi John,

    Question 2 refers.

    The answer to the Question defines a joint product as a “product which is produced simultaneously with other products and is of similar value to at least one of the other products.”

    I find this confusion – for example, suppose that 2 joint products, Product A and Product B, are seen at the separation point and their unit values are $22 and $14 respectively. Suppose, also, that by-products X and Y also result at the separation point and that their respective unit values are $0.21 and $0.22.

    According to the definition, X and Y have values which are similar to each others’, whereas A and B do not; thus, X and Y would be joint products?

    My understanding is that the significance of the value of a product at the separation point determines whether it is a joint product or a by-product, and whether its value is similar to other products is irrelevant to this definition.

    Please advise.

    • Firstly there is no rule about what are joint products or by-products – it is up to the company to decide.

      By products are products with a significantly lower value than the main products – they are effectively waste. So to look at the definition of joint products in isolation is silly.

      Although the likelihood of there being more than one by-product in the exam is extremely unlikely, if they have a significantly lower value that the main products being produced then they are still both by-products.

      The exam tests you understanding of the principles, not your learning of rules.

      • The same error is made in the F2 BPP Study Text (Page 255 – Question). The response from BPP is as follows: “Option B is not worded properly and needs to be amended to read

        “A product which is produced simultaneously with other products, and is of significant value when compared to the others””.

        In my question above, I addressed that it is the significance of the values of the products, and not the similarity of values, that ought to be investigated in determining whether a product is a joint- or by-product . I think you misunderstood that I was simply applying a rule.

        Please advise whether you will also reword the answer as BPP has said they will, or whether you believe it to be correct.

      • I didn’t mean to sound rude in my previous answer 🙂

        I am not sure whether to change it or not, partly because the question refers to ‘products’ of similar values, and by-products are not products (which may be a bit playing with words, but still), but also because I have a feeling that this was an actual past exam question (although I need to check).

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