Sir, regarding Q3 the cost of material is $0.75 , if we times 15000 units from last month, it equals to $11250, not the $9000 mentioned in question. I find this quite confusing, why shouldn’t them be equal?
Just have a quick question re the example above. Can you please advise why total of 15000 units were added for OP WIP for Labour and Overheads, they were only 40% complete from the previous month. Shouldn’t we have added 9000 units?
No. We are using the weighted average cost approach (not FIFO) and therefore we include all the WIP b/f (and include all the costs, including the amount spent in the last period starting the WIP.
I assume though that you are referring the calculation of the number of units that were completed from start to finish during the period (i.e. completed in full). This is because these incurred full cost per unit, whereas the opening and closing WIP only incurred part of the cost per unit and so we bring in the equivalent units for these two.
Cawa says
Hi John,
I do not understand how can we get the finished goods of 1800 units??
Product X is made in a single process.
The following data relates to the last period:
Opening WIP 400 units
Closing WIP 200 units
100% complete
50% complete
20% complete
Units added and costs incurred during the period 1,600 units.
There were no losses during the period. The weighted average method of inventory valuation is used.
John Moffat says
You must ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture.
If they start with WIP of 400 units and then add another 1,600 units during the period, it means they are now working on 2,000 units.
200 of the units are still being worked on at the end of the period, which means the remaining 1,800 units must have been finished.
Cawa says
Thank you! Will use the Tutor Forum.
John Moffat says
You are welcome 🙂
guyver101 says
Thank you for this and the previous lecture. Really helped me get my head around this. Much appreciated
John Moffat says
Thank you for your comment.
faiza.1999 says
Thanku needed the lecture ..
John Moffat says
You are welcome 🙂
Joanne94 says
Are values for opening work in progress always given?
John Moffat says
If they are needed they are given.
Lamini says
Thank you very much sir.
John Moffat says
You are welcome 🙂
kevinc19 says
Sir, regarding Q3 the cost of material is $0.75 , if we times 15000 units from last month, it equals to $11250, not the $9000 mentioned in question. I find this quite confusing, why shouldn’t them be equal?
grace3496 says
should we take more decimal places when calculating the unit cost?
John Moffat says
There is no need to 🙂
anya88 says
Hi John,
Just have a quick question re the example above. Can you please advise why total of 15000 units were added for OP WIP for Labour and Overheads, they were only 40% complete from the previous month.
Shouldn’t we have added 9000 units?
Many thanks,
John Moffat says
No. We are using the weighted average cost approach (not FIFO) and therefore we include all the WIP b/f (and include all the costs, including the amount spent in the last period starting the WIP.
nawal2000 says
oh okay.. thank you sir.
John Moffat says
You are welcome 🙂
nawal2000 says
sir in the example above could u plz explain why can we omit OP WIP and START TO FINISH plz
John Moffat says
But we don’t omit them!
I assume though that you are referring the calculation of the number of units that were completed from start to finish during the period (i.e. completed in full). This is because these incurred full cost per unit, whereas the opening and closing WIP only incurred part of the cost per unit and so we bring in the equivalent units for these two.