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- This topic has 5 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- March 2, 2021 at 11:20 am #612612
sir, I have don’t understand only one thing
question is from kaplan book chapter 9
question :BR Ltd makes a product requiring several successive processes. Details
of the first process for August are as follows:
Opening WIP: 400 units
Degree of completion:
Materials (valued at $19,880) 100%
Conversion (valued at $3,775) 25%
Units transferred to Process 2 1,700 units
Closing WIP 300 units
Degree of completion:
Materials 100%
Conversion 50%
Costs incurred in the period:
Material $100,000
Conversion $85,995
There were no process losses.
Required:
Prepare the process account for August using the FIFO method.Solution:
Statement of EUs Physical units Materials Conversion
% EUs % EUs
OWIP
completed 400 0 0 75 300
Fully-worked in
process 1,300 100 1,300 100 1,300
CWIP 300 100 300 50 150
______ ______ ______
Total 2,000 1,600 1,750
—— —— ——
Costs $100,000 $85,995
Cost per EU $62.50 $49.14
Valuation of transfers to Process 2:
OWIP value from last period = $19,880 + $3,775 = $23,655
OWIP completed this period (conversion only) = 300 × $49.14 = $14,742
Fully-worked current period
Materials = 1,300 × $62.50 = $81,250
Conversion = 1,300 × $49.14 = $63,882
Total valuation of transfers to Process 2 = $183,529
Valuation of CWIP:
Materials = (300 × $62.50) = $18,750
Conversion = (150 × $49.14) = $7,371
Total valuation of CWIP = $26,121
Process 1 Account
Unit $ Units $
OWIP 400 23,655 Transferred to 1,700 183,529
Process 2
Materials 1,600 100,000 CWIP 300 26,121
Conversion 85,995
––––– –––––– ––––– ––––––
2,000 209,650 2,000 209,650
––––– –––––– ––––– ––––––sir i don’t understand this line : OWIP completed this period (conversion only) = 300 × $49.14 = $14,742
how did we came up with 300 units for opening work in process completed this period.
I watched the lectures and was not able to find this line where we have to find out the opening work in processMarch 2, 2021 at 11:26 am #612622sorry for the format of the account and totalling. I copy-pasted the whole thing and also did the format correct while typing but it somehow didn’t post that way
March 2, 2021 at 11:31 am #612635is the conversion of (100-25)% of 400
also please let me know what does conversion really means in this makes me confusing
March 2, 2021 at 3:34 pm #612703The conversion costs are the labour and overheads that are added to the materials in order to turn them into finished units.
The opening WIP is 400 units, but because they are already 25% complete (and because we are using the FIFO approach) only 75% conversion work was needed this period and so the effective units are 75% x 400 = 300.
(Do appreciate that you can never be asked to produce a process account in the exam. Much better than using the Study Text is to watch all of the lectures and then practice using the Exam Kit, because the questions in the Exam Kit are all exam standard and are in the exam format.)
March 3, 2021 at 6:53 am #612893okay sir thank you, yes sir I know to practice using exam kit but just to know how to deal with process account I am doing question from study text for this part only
in future, I will definitely use watch lectures and then exam kit, lectures are good for the management and financial accounting I was able to pass financial accounting with lectures and exam kit
March 3, 2021 at 9:45 am #612944Great 🙂
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