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Dear All,
there is a Test Question 9 in Chapter 12 F2 paper. I’m stuck for some time now.A company operates a process costing system using the first-in-first-out (FIFO) method of valuation. No
losses occur in the process. All materials are input at the commencement of the process. Conversion costs
are incurred evenly through the process.
The following data relate to last period:
Units Degree of completion
Opening work in progress 2,000 60%
Total number of units completed 14,000
Closing work in progress 3,000 30%Costs arising:
Materials 51,000$
Conversion 193,170$
What was the value of the closing work in progress for last period?
Answer is $22,890Would appreciate any help.
Working out the Process a/c first:
———————————————
B/F 2000 | Finished 14000
[Started 15000] | C/F 3000The started units is the missing figure in the ‘T’ a/c
Therefore started and finished units is 12000 [either 15000-3000 or 14000-2000]
Mats. Conv.
Cost 51000 193170Units
B/F (2000u) 0 (0% remain) 800 (40% remain)Start to finished 12000 12000
C/F (3000u) 3000 (100% done) 900 (30% done)
——————— ———————-
Equivalent units 15000 13700Therefore 51000/15000=$3.4 193170/13700=$14.1
Hence Value of C/F (3000u): Mats. 3000u x 100% x $3.4 = 10200
Conv. 3000u x 30% x $14.1 = 12690
———
$22890I hope you can understand the above.
The important line in the question is “All materials are input at the commencement of the process.” This means the Materials are 100% complete and actually the percentages of 60% and 30% given in the question only apply to the Conversion costs.
As usual, in the B/F units, 100% Mats are complete and so only 0% remain, likewise 60% Conversion complete so 40% remain.
Equivalent units: 15000 = 0 + 12000 + 3000; and 13700 = 800 + 12000 + 900
The final figure of $22890 is 10200 + 12690
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