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Hi sir, am i right to say that a company that undertakes continuous production is more likely to have a material balance of WIP than a company which doesn’t .
For september 2016 exam question 17(a)(ii), i dont understand the following two procedures in the answer key. Could you explain sir ?
– For a sample of inventory items, review the calculation for equivalent units and associated equivalent unit cost and recalculate the inventory valuation
– Select a sample of items included in WIP at the year end and ascertain the final unit cost price, verifying to relevant supporting documentation, and compare to the unit sales price included in post year end sales invoices to access net realisable value.
Q1 Yes.
Q2 Think back to process costing. 200 units 30% complete are equivalent to 60 whole units. Stock can be costed using that approach
Q2 The final cost is cost to date plus estimated cost to complete. If this isnhigher than sp achieved, the stock will have to be written down to NRV, which is sp less further coats of completion and sale.
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