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MA Chapter 13 Questions Process Costing – Work-in-Progress

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  1. Hello sir/madam.

    While calculating the cost per unit on WIP, can we calculate on the equivalent units rather than the full units? As at the end of the day only that amount of equivalent units have been used up in the capital of materials or labour?

  2. Hi, for number 1, shouldn’t the answer for process x be normal loss? When you take the expected loss 5200 from the input of 65000 you will get 59 800 instead of 58 900. Then when you take 59 800 from 65 000 you will get 5200.

    • The opening WIP is 60% complete for labour, but is 100% complete for materials.
      (The question says that all materials are input at the start of the process, and this is usually the case as I explain in my lectures. Conversion costs are labour and overheads if there are any.)

    • You will have to say which bit of the answer provided you are not clear about.
      (Did you watch my free lecture on this before attempting the test, because this example is very similar to the example that I work through in the lecture?)

  5. Hi There

    So if anyone is struggling with units…..

    I use a an equation instead of a T-Account like John does.

    So simply put.

    Input=Output

    by extension,

    Input + Opening Balance WIP = Output + Closing WIP

    E.g Question 5

    13500 = 11 750 + ?

    ie. 13500 = 11 750 + 1750

    Then just use this formula in accordance with each cost centre, like materials and labour.

    P.S. In chemistry you learn that energy can’t be created or destroyed, like to think this equation embodies this law, but with units.

    • Please do not type in capital letters.

      13,500 units were transferred into the process and 11,750 were transferred out as completed. Therefore the WIP is 13,500 – 11,750 = 1,750 units.

      The value of each unit is the cost when transferred in $4.50, plus the additional material of $1.25, plus the labour and overheads of $2.50 because they are not complete. So a total of $8.25 per unit. So the total value of the WIP is 1,750 x $8.25 = $14,437.50.

      As I explain in the lectures, the material transferred in and any material added are always 100% complete and are therefore at full cost per unit whether the units are completed or are still WIP. It is only the labour and overheads for which only part of the cost is relevant for WIP.

  8. Greetings,

    For Q4,
    It says all materials were input at the beginning of the process, not the end.

    So for Opening, we assumed 100% finished – so no cost incurred.
    But for the closing end, why dont we assume both material and labour = 30% work done – as that is the only information provided without specifying its for conversion cost or material.

  10. hi Sir, l did not undersrand why you used 3000 units when calculating material cost per unit. Is it not supposed to be the 12000 units for finished goods + equavalent units of finished WIP and closing WIP, or is it because we assume that finished WIP material and closing WIP material is 100% complete.

  11. hi sir according to ur last comment the process is same however the why the openiing wip was not taken as 40 percent to finish the process n why the closing inventory is all calculated as 3000 , it should be 30 percent though im talking about Q4 THANKS

    • Hi, I think the materials in all processes are 100% consumed.
      So we can list the following table:
      M L
      open 2000 100% 60%
      period 12000 100% 100%
      closing 3000 100% 30%

      Hoping my thought can help you!

  12. Q 3 – In your previous lecture you have discussed how to calculate finished units by drawing a T diagram. You haven’t mentioned input units in any of your lectures. Input units seem to be different from finished units. We calculate finished units by adding 2000+14000, balance it with closing units of 3000 on the other side, difference = 13000.

    So units completed from start to finish in this period is 13000 – 2000 = 11000

    Is input of units different to finished units?

    • I cannot remember whether or not I actually use the word input, but given that the input units means ‘units put in’ I hardly need to 🙂
      Input is units that are put in, and output is units that go out (i.e. finished units).

      • hi sir how are you thanks for the lectures
        same question as above pus, is total number of units competed this period includes the units of opening WIP although 2000 were introduced it should be a total of 16000 can you pls clarify.

        thanks

  14. In Q5 while completing Closing WIP, why we have added the additional material of $1,25? Since it was incomplete product, how can we understand whether products are incomplete by labour only or by both material and labour?

    Thank you..

  15. Question 4.
    Two questions:

    1. On material cost, why didn’t we include ony 30% of the WIP units but instead 100%?
    2. When we were calculating closing WIP at the final stage, why in case of materials we did not apply the completion rate of 30% while we applied it for the conversion costs?

    Thanks for the lectures!

    • 1. Because question mentioned all material was input in the beginning
      2. Again because material input was 100% at the start of process therefore only conversion was 30% complete

      • hi nasima as far as this topic has been thought there is always a percentage of materials given in opening wip i hv same concern can you pls explain thanks

      • 14,000 units were completed, but 2,000 units were already work-in-progress at the start of the period. So only 12,000 we completed from start to finish.

        Did you not watch my free lectures before attempting the test, because I do show the importance of this when it is FIFO?

      • And so did I in my previous reply – read my first sentence. 14,000 were completed and of those 2,000 had already been started at the start of the period and the other 12,000 were therefore done from start to finish in this period.

        Please do watch my free lectures on this.

      • In the lectures, we included the closing WIP when sorting out the units. But as per your comment, it seems like we ignored. Why?

      • The closing WIP has not been ignored at all! Have you looked at the answer that appears when you submit and then review the test? The workings are exactly the same as the workings in my lectures.
        We take the 12,000 that have been fully completed together with the proportion of the opening and closing WIP completed during this period.

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