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Good evening,
I’m really struggling with the questions where different cost are added upon different stages of completition, I.e:OWIP 400 UNITS 60% completed
CWIP 600 UNITS 20% completedUnits started 1000
Units finished 8003/4 of the materials are added at the start of the process, and the remaining are added when the process if 50% completed. The company uses FIFO for cost allocation.
On the solution I can see that the OWIP units at valued at 0% but I can’t see why (is it because they are beyond 50% and the cost have been incurred?)
Many many thanks!
You are wrong to say that the opening WIP is valued at 0%. What you mean is that since we are using FIFO, none of this periods material cost is applied to the opening WIP because (as you say) since they are more than 50% complete for material the whole of the material cost will have been spent last period and so there is no extra cost in this period.
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