- December 9, 2019 at 12:56 pm
A company which operates a process costing system had WIP at the start of last month of 400 units ( values at $3000) , which were 40% complete in respect of all costs . Last month 1500 units were completed and transferred to the finished goods warehouse . The cost per equivalent unit for output produced last mo the was $20 . The company use the FIFO method of cost allocating .
What is the total cost of the 1500 units transferred to the finished goods warehouse last month
Output 1500 units
WIP 400 units
Work started and finished (1500-400) 1100
Equivalent units b/f as WIP = 160(400×0.4)
Value of work done in the period on WIP = $4800 ( 400-160) x 20$
Value of work started and finished in the period (1100 x20)= 22.000
-> 3000+4800+22000= 29800$
I understood “1” , but at ” 2 ” , I don’t understand the workings of 400-160 x 20 = 4800$
Can you pls help this question . Thanks Mr JohnDecember 9, 2019 at 3:50 pm
There were 400 units of opening WIP. They were already 40% finished, and so they only had to work on the remaining 60%. So the cost of finishing them is 60% x 400 x $20, which is $4,800.
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